“THE MARTIN RULING”—TN COURTS OK HIDING LEGAL; FINANCIAL DOCS

‘THE MARTIN RULING” CHANGES TENNESSEE’S FRAUD RULES

Team reporing to: www.Stopprobatefraud.com | Nashville, Tennessee­­

In a giant shift from all other states in the USA, Tennessee’s appeals court has upheld “the Martin Ruling” a lower-court finding that makes it now legal in Tennessee for attorneys, bankers, accountants and other fiduciaries to hide legal and financial records from clients, beneficiaries—and the courts.

James Martin III; Williamson County Tennessee Judge

“The Martin Ruling” is named after Judge James G. Martin III from Williamson County. Martin, a veteran of both public and private law practice, has nearly a half-century of experience in family law and lectures on it for the Tennessee Bar Association.

Martin wrote his ruling after presiding over the two-day breach of fiduciary duty trial in Franklin, Tennessee.

 

In all other states, hiding legal and financial records from principals it is considered a breach of fiduciary duty, fraud, and/or obstruction of justice.

RULING OFFERS DETAILED “ANATOMY OF FRAUD” CASE STUDY

Often, estate-accounting trials involve a buffet of “he said/she said” claims. That is not the case with the trial that produced “the Martin Ruling.” Trial records offer great details on a laundry list of frauds that are commonly found in probate, trust and estate accountings.  These details give readers an excellent case-study and are the basis for our “anatomy of fraud” series about this ruling.

BIG FIRMS TIED TO A SMALL CASE

The case was rooted in a story common to estates:  A surviving wife had signed a pre-nuptial but after her husband’s death she wanted more money. In this case, the surviving wife, called “Miss Cherry Lane” was also the executrix of the estate.

“Miss Cherry Lane” hired veteran estate attorney Randle S. Davis as the attorney for the estate. Davis was the senior

Attorney Bill Purcell, partner at Farmer, Purcell, Lassiter and White.

managing partner of Lassiter, Tidwell, Davis Keller and Hogan. The firm is now called Farmer, Purcell, Lassiter and White. It is the flagship firm of Bill Purcell, the Harvard lecturer and former mayor of Nashville.

Together, the executrix and the firm hide assets of the estate and the family’s trusts from the man’s sons, who were trustees and beneficiaries of the family’s estate and trusts.

The small case quickly expanded and eventually employed some of Tennessee’s top legal talent: Waller, Lansden, Dortch and Davis; Howard, Mobley, Hayes and Gontarek; Bone, McAllester, Norton; Chattanooga’s Mike Richardson and the estate section of Kenlan, Schweibert, Facey and Goss from Vermont.

“THE MARTIN RULING” REVERSES BLACK-LETTER LAW:

In the past, Tennessee, like most states, treated the administrators and of estates as fiduciaries. A “fiduciary,” according to www.Law.com is “…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.” 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.

Administrators of estates are thus in the unique position of being both “officers of the court” and “fiduciaries.”

SMALL STORY; BIG NEW RULINGS

The accounting fraud case began with Williamson County Clerk and Master Elaine Beeler, and was later heard by Williamson County Judge Timothy Easter, then Judge Martin and the middle Tennessee court of appeals.

The details of the story are well documented:  E.R. “Woody” Darken was a retired businessman living in Leiper’s Fork. His first wife, and the mother of their two children Eric and Brett, had died from cancer in 1997. Years later Woody remarried with a pre-nuptial in place between he and his new wife “Miss Cherry Lane” (the executrix).

Nashville Attorney Randle S. Davis

Darken was one of three generations of the family that paid Nashville attorney Randle S. Davis for his estate and tax planning expertise. As part of this estate planning work, Davis had authored Mr. Darken’s portion of the pre-nuptial contract.

“Miss Cherry Lane” for her part of that pre-nuptial, hired attorney Ed Yarborough, a former federal prosecutor and partner at Bone, McAllester, Norton.

When Darken died his two children were named trustees and beneficiaries of his estate and the family’s trusts. The trustees and their families also were clients of Davis and the firm. After the administration of Mr. Darken’s estate was opened, the trustees asked Davis for their family’s legal and financial records, including a copy of the pre-nuptial.

Davis promised to give them the records he had from the firm’s files.

But the promise was never fulfilled. For the next two years, the firm refused to give them their father’s legal and financial records, including the pre-nuptial contract and accountings and family’s trust records.

A TENNESSEE TWIST

What the trustees did not know was that after the death of their father, the executrix had changed law firms. She left Yarborough and Bone McAllister and Norton and hired Davis at Lassiter, Tidwell, Davis, Keller & Hogan.

Davis did not inform the trustees and their families that he was now representing the executor in her bid to acquire more assets. Davis did not resign from his work for the trustees in their personal estates or in their roles as trustees of the family’s trusts.

The trustees were forced into a legal fight over whether they had the right to their own family’s trust, legal and financial records.

After a three year fight the trustees initially prevailed: Judge Timothy Easter ordered the Davis 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. The assets listed in the hidden pre-nuptial did not match the assets listed in the accountings produced by the executrix and Davis. Missing from the estate accountings were thousands of shares of stock, loan contracts, trust accounts, and other assets.

THE EXECUTRIX REFUSES MEDIATION; DEMANDS TRIAL:

The trustees were eager to resolve the issue, and willing to mediate as directed by Judge Easter. But Davis and the executrix refused the Judge’s mediation order. They demanded a trial.

Judge Easter was removed from the case and replaced by Judge Martin. The case was a simple “breach of fiduciary duty” trial claim brought by the trustees to recover from the executrix the legal fees and the assets missing from the family’s trusts and estate.

TWO DAY TRIAL. EXECUTRIX REFUSES TO TESTIFY

At trial, Davis and the two trustees delivered hours of testimony that detailed the timeline of their concealment. Davis admitted to working closely with the executrix, and hiding computer drives, securities, trust files, loan and mortgage records, business contracts and the pre-nuptial agreement.

From the witness stand neither Davis nor the executrix denied any of the claims brought by the trustees.

The billing records documented that both Davis and the executrix billed the estate for the time they had spent working together to hide and destroy the family’s records.

In other states these activities are widely referred to as accounting fraud, securities fraud and fraudulent concealment and considered a breach of fiduciary duty.

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

TENNESSEE STANDS ALONE

But in a landmark departure from black-letter law. Judge Martin reversed Easter’s initial finding for the trustees, and instead ruled “for the defendant.”

“The Martin Ruling” establishes that in Tennessee, when a fiduciary and/or their attorney hides legal and accounting records it not fraud, obstruction of justice or even a breach of fiduciary duty.

Martin’s ruling denied the trustees any recovery for the costs needed to get the accountings that had been hidden by the executrix and the firm.

Additionally, Martin found that the trustees were liable for all expenses billed by the firm to defend the executrix at the trial she had demanded.

Tennessee Attorney General Herbert Slaterly, III

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 of our “Anatomy of Fraud” series based on this case. The series is designed to help readers spot, stop and recover from fraud in probates, trusts, guardianships and estates.

To read part 2, please follow this link:

https://www.stopprobatefraud.com/blog/2018/11/16/tennessees-new-rules-for-fraud/

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