IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
November 6, 2008 Session
THE ESTATE OF ADA TOWNSON, By and through her duly appointed
Conservator, East Tennessee Human Resources Agency, by its representative
agent, Carol Silvey, v. THE ESTATE OF JEANETTE EAST, By and through
her duly appointed Conservator, Polk Cooley, Esq.
Direct Appeal from the Chancery Court for Roane County
No. 15621 Hon. Frank V. Williams, III., Chancellor
No. E2008-00689-COA-R3-CV - FILED JANUARY 20, 2009
The real parties at interest in this action are Carol Silvey, plaintiff and Jeanette East, defendant.
They are represented by their respective conservators. Investments were made in the parties’ joint
names and when the investments matured, the conservator for Jeanette East made investments in a
sole account of Jeanette East. The conservator for Carol Silvey brought this action for a declaration
that the investments should remain in the joint estates. The Trial Judge approved the actions of the
conservator for Jeanette East but on appeal, we order that the accounts be returned to the joint
ownership status.
Tenn. R. App. P.3 Appeal as of Right; Judgment of the Chancery Court Reversed.
HERSCHEL PICKENS FRANKS, P.J., delivered the opinion of the Court, in which CHARLES D. SUSANO ,
JR., J., and D. MICHAEL SWINEY , J., joined.
William A. Reeves, Knoxville, Tennessee, for appellant, The Estate of Ada Townson.
Jennifer E. Raby, Cockwood, Tennessee, for appellee, The Estate of Jeanette East.
OPINION
Background
Plaintiff, Estate of Ada Townson, by and through its conservator, filed a Declaratory
Judgment action against the Estate of Jeanette East, asserting that any joint assets that had been
altered should be returned to their former joint status. The Petition avers that East and Townson
were sisters who owned a number of bank accounts jointly, and that in 2005 they were determined
to be incapacitated and both had conservators appointed. The Petition sought a declaration that the
joint accounts should be maintained as joint accounts, and that if the status of any of the accounts
had been changed by the conservator, they should be ordered restored to their prior status.
The conservator for the Estate of East, Answered, stating that East and her deceased
husband had amassed a significant estate, and denied that all of the accounts listed in plaintiff’s
exhibit were held jointly. A trial was held on February 11, 2008, and the conservator for East
testified that he had determined that the funds in the CD’s/accounts, came from money that the Easts
had accumulated, as well as from the sale of their farm after the husband died, and the sale of a rental
house.
He explained that he interpreted the accounts that were titled in both sisters’ names
as being an agreement that the money would remain that way for the term of the CDs only, and when
the CDs expired, he reinvested the money in a new CD solely in East’s name. He explained that he
did this because it was East’s money, and because prior accounts could leave these assets open to
a claim from TennCare for Townson’s share of the expense.
Following trial, the Trial Court found that there was no proof regarding how the
parties had treated such accounts in the past, and that it was thus not possible to say that the parties
had a certain course of dealing that would be indicative of how they would have handled such
accounts in the future. The Court said that it was not convinced by plaintiff’s argument that these
accounts could be continued with the same ownership status, but could not be cashed out or
otherwise have the ownership status changed after the parties were declared incompetent. The Court
held the conservator for East had not engaged in self-dealing, but acted properly and had the right
to do what he had done, as it was a reasonable course of action.
On appeal, plaintiff raised this issue:
Whether the Trial Court erred in holding that Ms. East’s conservator did not act
beyond the scope of his agency by transferring all of the funds from the parties’
jointly held certificates of deposit and joint checking accounts into accounts titled
solely in Ms. East’s name?
The exhibits in the case demonstrate that the accounts/CDs at issue were all jointly
titled, some expressly listed with rights of survivorship.
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Appellee argues that the Trial Court was correct in holding that the conservator for
Ms. East acted properly in closing/redeeming the accounts/CDs and reopening the accounts or
reinvesting the funds in the name of Ms. East alone, because there was no evidence that the
conservator was self-dealing, and the proof showed that most of the funds in the accounts came from
Ms. East.
Appellant argues the conservator should not have changed the ownership of these
accounts/CDs, because the conservator is charged with managing the estate so that if the incompetent
recovers, she will find the estate in as close as possible to the same state she had left it. Appellant
further argues that the conservator does not have the authority to exercise elective rights of the ward
without prior court approval.
Appellant cites the case of Grahl v. Davis, 971 S.W.2d 373 (Tenn. 1998), wherein
the conservator was the daughter of the ward, and she allowed her father to redeem certain jointly-
held CDs and reinvest them either in his sole name, or as joint tenants with the conservator. In
analyzing whether this action was proper, the Supreme Court explained:
A conservator occupies a fiduciary position of trust of the highest and most sacred
character. The conservator is to manage the conservatee's estate to the best
advantage. The conservator should endeavor to manage the estate so that if the
incompetent person recovers, he or she will find the estate as nearly as possible in the
same condition as he or she left it. A conservator should not change the character of
the conservatee's property interests unless the change is necessary to protect and
promote the interests of the conservatee. In considering a conservator's request to
cash a life insurance policy for the benefit of the conservatee's estate, this Court, in
Folts v. Jones, stated:
Before the character of the interest in property held by a [conservatee] can be
changed, it must be made manifest that it is necessary to protect and promote his
interest. Although as a rule, the court will preserve, as far as possible, the interests
of the succession, this rule yields to the paramount rule which makes the
[conservatee's] welfare the first consideration without regard to the rights of those
who may have eventually rights to succession.
A conservator is not the alter ego of the conservatee, however, and has no authority
to exercise an elective right or power of the conservatee. Therefore, a conservator
has no authority to terminate joint accounts in which the conservatee has an interest
or to change a beneficiary on a life insurance policy. Instead, the conservator must
petition the court, and the court, on behalf of the conservatee, can exercise such an
election if it is clearly proven to be in the best interests of the conservatee.
Id. at 377-378 (citations omitted).
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In the case of Folts v. Jones, 132 S.W.2d 205 (Tenn. 1939), the conservator petitioned
the court to allow him to surrender/cash in a life insurance policy for the ward, rather than continuing
to pay the premiums related thereto. The Supreme Court in that case said:
An insane person is, of course, incapable of exercising a right or power of election,
but any election on his behalf should be exercised by the court. But, to authorize
such election it shall clearly appear to be for the best interests of the incompetent. .
. . the court will not elect to order a surrender of the policy for its cash value and
thereby destroy the beneficiary's contingent interest, save and unless it be plainly
shown to be for the manifest interest of the insane insured.
Id. at 207-208.
This rule that the conservator cannot exercise elective rights of the ward was also
followed in the case of Blackburn v. Blackburn, 63 S.W.3d 338 (Tenn. Ct. App. 2001), which relied
upon the above cited cases as authority, as well as cases from other jurisdictions, including (but not
limited to) In re Estate of Wright, 424 N.W.2d 268 (Mich. 1988)(conservator may not change the
nature of joint accounts created by the disabled adult before that person became disabled); Hendricks
v. Grant County Bank, 379 P.2d 693 (Okla. 1963)(guardian has no power to exercise personal right
of ward with respect to jointly held CD unless it is shown that funds are needed for ward); and
Howard v. Imes, 90 So.2d 818 (Ala. 1956)(guardian cannot terminate joint account but can make
periodic withdrawals as needed for care of incompetent).
In Howard, the Alabama Supreme Court relied on a case with facts strikingly similar
to this case, i.e. In re Guardianship of Williams, 313 So.2d 411 (Fla. Dist. Ct. App. 1975). In
Williams, the conservator for Edith Williams petitioned the trial court for direction after finding two
bank passbooks, titled in the names of Ms. Williams and Bell Stokes “payable to either or the
survivor”. Id. Stokes was also under conservatorship, and the court ordered the accounts be closed
and the money divided equally between the two wards’ estates. Id.
The appellate court ruled that the court erred in ordering such action be taken, as the
general rule is that the conservator had no right to make withdrawals from a joint bank account
unless the money was needed by the ward, and also that the effect of incompetency was the loss to
the incompetent’s estate of discretionary property rights, leaving the estate with only the right to
proceed to survivorship, or to only use such funds as were needed by the ward. Id. The court
ordered that the joint accounts with right of survivorship be reinstated. Id.
Based on the foregoing precedent, a conservator may not elect to terminate a joint
account, and can only withdraw such funds from said account as are shown to be necessary for the
care of the ward. Accordingly, the Trial Court erred in determining the conservator’s actions in this
case was proper. This was error because the conservator did not show that the funds he withdrew
from the joint accounts/CDs were needed for her care. We reverse the Order of the Trial Court and
direct that the accounts/CDs be restored to the joint status as existed when the incompetencies
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occurred. The Judgment of the Trial Court is reversed and the cost of the appeal is assessed to the
Estate of Jeanette East.
______________________________
HERSCHEL PICKENS FRANKS, P.J.
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