Patsy C. Cate v. James Daniel Thomas

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
October 10, 2005 Session

PATSY C. CATE v. JAMES DANIEL THOMAS

A Direct Appeal from the Chancery Court for Madison County
No. 58062 The Honorable Steven Stafford, Chancellor

No. W2005-00028-COA-R3-CV - Filed December 14, 2005

This case arises out of an ejectment action filed by Appellee against Appellant. Appellee
claims ownership of the disputed property under a 1990 Warranty Deed and Appellant asserts that
this Deed should be set aside due to fraud. The trial court found that the 1990 Deed was valid and
that Appellant was a tenant at will on the property. The trial court further found that Appellant was
in arrears on rent and that Appellee had a right to possession of the property and rents. We affirm.

Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Chancery Court Affirmed

W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which ALAN E. HIGHERS,
J. and JOHN EVERETT WILLIAMS, J., joined.

Lanis L. Karnes of Jackson, Tennessee for Appellant, James Daniel Thomas

John Van den Bosch, Jr., of Jackson, Tennessee for Appellee, Patsy C. Cate

OPINION

The property at issue in this case is a 52.3 acre tract in Madison County, Tennessee known
as 300 Cotton Grove Road (the “Property”). The Property was originally owned by David Cate and
his wife Patsy Cate (“Appellee”).1 By Warranty Deed dated May 20, 1987, and filed at Book 469
Page 106 in the Madison County Register’s Office, the Cates conveyed the Property to James
Thomas (“Appellant”) and his wife Patricia. In connection with this transfer, the Thomases
executed an “Installment Promissory Note” (the “Note”), dated May 20, 1987, and payable to the
Cates in the amount of $51,000.00 bearing interest at a rate of 8.5%. Mr. Thomas claims that he gave
the Cates $5,000.00 in gold coins as a down payment on the Property.

1
Mr. Cate died on May 17, 1990 and, according to the Complaint, the Property passed to Ms. Cate by
“operation of law.”
 In 1990, the Thomases divorced, and Mr. Thomas asserts that he also experienced financial
difficulties that year. Mr. Thomas contends that he and Mr. Cate were concerned about Mr.
Thomas’ ability to service the Note as well as his ability to keep the Property in the face of his
divorce and financial situation. Given the parties’ long-standing business and personal relationship,
Mr. Thomas contends that Mr. Cate “offered to take the [P]roperty out of JAMES DANIEL
THOMAS’s name for a brief period of time to protect them both from potential creditors.” On May
15, 1990, Mr. Thomas and his wife conveyed the Property back to the Cates by Warranty Deed filed
at Book 498 Page 535 in the Register’s Office of Madison County (the “1990 Deed”). The 1990
Deed was signed by both Mr. Thomas and his wife Patricia, and their signatures were notarized.
Despite the transfer, Mr. Thomas continued to occupy the Property, and, according to Mr. Thomas,
Mr. Cate suggested a six-month lease agreement, which Mr. Thomas describes in his Counterclaim
as “a writing only not to be enforced.” On May 16, 1990, Mr. Thomas and the Cates did enter into
a “Lease Agreement” (the “Lease”). The Lease provides, in relevant part, that:

1. Lessor [the Cates] leases the premises to Lessee [Thomas] for a
term of six (6) months, ending on the 16th day of November, 1990....

2. Lessee shall pay rent to Lessor at a rate equal to $125.00, payable
in advance beginning on the first day of June, 1990, and on the first
day of each month thereafter for the term of this Lease Agreement....

* * *

8. In the event Lessee fails to pay the monthly rentals provided herein
when they mature and shall remain in default in any of said payments
for a period of fifteen (15) days, or violate any other obligation
imposed upon the Lessee by this contract, the Lessor may, at his
option, without notice, declare this Lease terminated, take immediate
possession of the leased premises and declare all remaining
installments of rent immediately due and payable. Should the Lessee
fail or refuse to surrender possession thereof in the event of such
default, the Lessor may recover said premises as in actions of
unlawful entry and detainer. Waiver of one default shall not be
deemed or treated as a waiver of any subsequent default.

* * *

24. Lessor hereby grants to Lessee the exclusive option to purchase,
upon the following terms and conditions, the Leased Premises. The
terms of the option are as follows:

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 (a) If the Lessees are not in default under this Lease Agreement, the
option may be exercised at any time prior to midnight, 16th
November, 1990, by written notice as provided herein.

(b) In the event of a valid exercise of the Option hereby, the Purchase
Price for the Leased Premises shall be the sum of $46,400.00 cash,
payable at closing. Any rent paid pursuant to this Agreement shall be
applied to the purchase price.

(c) In the event Lessee fails to exercise this Option as herein
provided, or in the event of any default by Lessee before or after
exercise of the Option under this Lease Agreement, all money paid by
Lessee to Lessor during the Lease Agreement, shall be retained as
rent, and the rights to exercise the Option shall terminate.

Although there is some evidence that Mr. Thomas continued to service the existing Note, it
is undisputed that he failed to pay rent pursuant to the Lease. By letter of December 8, 2000, Ms.
Cate (through her attorney) instructed Mr. Thomas to “remove yourself and all personal property
within ten (10) days from the date of this letter...” (emphasis in original). Mr. Thomas did not heed
the letter, and, on December 20, 2000, Ms. Cate filed an ejectment action against Mr. Thomas.

On April 9, 2001, Ms. Cate filed a “Motion for Default” against Mr. Thomas for his alleged
failure to answer the Complaint. On April 20, 2001, Mr. Thomas filed his Response, in which he
generally denied the material allegations of the Complaint and specifically denied that Ms. Cate “is
[the] owner [of the Property] and denie[d] that she is entitled to possession of the land.” As
affirmative defenses, Mr. Thomas raised the following in his Response:

1. At all times material, for 13 ½ years, JAMES DANIEL THOMAS
acted within the terms of the installment contract, until the month of
December, 2000 and thereafter, when Plaintiff breached the contract
with a complete change of terms. Consequently, the Plaintiff may not
recover from [] JAMES DANIEL THOMAS.

2. At all times, Plaintiff has been fully aware of the installment
contract agreement between the parties, and has accepted payment
under the original terms of the agreement regarding principal and
interest, mailed to JAMES DANIEL THOMAS the tax bills and
allowed JAMES DANIEL THOMAS to pay property taxes each year,
requested JAMES DANIEL THOMAS pay insurance on the
premises, and manicure and improve the property as only a land
owner would do. Any allegations that she is the owner thereof are a
fraudulent misrepresentation. Said misrepresentation has resulted in

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 an abuse of process. Consequently, Plaintiff may not recover from
JAMES DANIEL THOMAS.

3. Plaintiff’s actions in accepting JAMES DANIEL THOMAS’s
monies, payments and management of the property as an owner under
the same terms and conditions for approximately 13 ½ years waives
any rights to transact business contrary to these terms. Consequently,
Plaintiff may not recover from JAMES DANIEL THOMAS.

4. Plaintiff’s actions in protecting her land by holding the deed until
the installment note was completed was for personal motives to
protect her property and to protect it against creditors and to avoid
IRS consequences personally. She does not come to Court with clean
hands. Consequently, Plaintiff may not recover from JAMES
DANIEL THOMAS.

5. Plaintiff is barred by the Statute of Limitations to bring said
action. Consequently, Plaintiff may not recover from JAMES
DANIEL THOMAS.

Mr. Thomas also filed a Counterclaim, which reads, in pertinent part, as follows:

3. On April 30, 1997, JAMES DANIEL THOMAS gave to David
Cate $5,000.00 in gold coins “received as collateral to be returned
May 30, 1987" to hold in escrow until the Deed of Trust and
accompanying Installment Promissory Note could be drawn up by
Attorney Melvin Rowland, attorney at law, for the purchase of 52.3
acres of land, located at 300 Cotton Grove Road, Jackson, Tennessee.

4. The Deed of Trust and accompanying Installment Promissory Note
was prepared by Attorney Melvin Rowland, attorney at law, for the
purchase of 52.3 acres of land, located at 300 Cotton Grove Road,
Jackson, Tennessee. Promissory note was executed May 20, 1987.

5. Purchase price was $51,000.00. Interest was 8.5%.

6. Principal was paid twice a year. Interest payments were computed
as simple interest and paid monthly. December was always a free
month in exchange for JAMES DANIEL THOMAS’s paying cash as
often as possible.

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7. Periodically the payments were made by check, including the
check dated February 20, 1990, #0752 for interest in the amount of
$329.00.

* * *

9. In 1990, JAMES DANIEL THOMAS went through a divorce and
financial difficulty. Plaintiff’s Husband, David Cate, was aware of
JAMES DANIEL THOMAS’s attempts to satisfy all creditors and
prevent bankruptcy. David Cate was concerned how any divorce or
adverse financial matters would affect his Installment promissory
note as well as JAMES DANIEL THOMAS’s ability to keep the
property.

10. In May 1990, the principal amount due was $46,400.00.

11. Plaintiff’s husband, David Cate, offered to take the property out
of JAMES DANIEL THOMAS’s name for a brief period of time to
protect them both from potential creditors. He suggested a six-month
lease, which was effective as a writing only and not to be enforced,
to protect the property for all parties. JAMES DANIEL THOMAS
agreed and Plaintiff’s husband had a warranty deed and lease
prepared.

12. The lease did indicate the amount of principal due at this time,
$46,400.00.

13. On May 15, 1990, the deed was executed, with the parties
intending a paper writing only, and did not intend to enforce the
writing.

14. On May 16, 1990, the paper writing was signed by all parties;
with no intent to follow its provisions. JAMES DANIEL
THOMAS’s signature was not notarized.

15. Said writing was for the protection from other parties.

16. To date, the $5,000.00 security deposit of gold coins have not
been returned.

* * *

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 27. At no time did JAMES DANIEL THOMAS “continue paying the
amount of rent specified in this lease,” as he never paid that amount.
He has always paid the principal and interest as agreed in the original
promissory note, and as provided to him through the computations of
Plaintiff and her Husband.

28. The purchase price for the option of $46,400.00 was the amount
of principal which was due on November 1990. Rent was to be
applied to the purchase price.

29. The entire lease is void as if it never existed as there was never
any intent to abide by the agreement.

30. The accompanying deed to Plaintiffs is void as if it never existed
as there was never any intent to abide by the transfer.

On April 26, 2001, Ms. Cate filed an “Answer to Counter Complaint,” in which she generally
denied the material allegations contained in the Counterclaim. By Order of July 3, 2001, the parties
were ordered to mediate this matter. On November 30, 2001, the mediator reported that, despite
good faith mediation on the part of the parties, the case was at an impasse.

The case was heard by the court sitting without a jury on July 9, 2004. On September 9,
2004, the court entered its Decree, which reads, in pertinent part, as follows:

In this cause the Plaintiff, Patsy C. Cate, filed a Petition for
Ejectment against the Defendant, James Daniel Thomas, on
December 19, 2000, claiming ownership of the property and asking
that James Daniel Thomas be removed and that he pay for damages,
rent, and attorney fees as prescribed by a lease dated on May 16,
1990. The Defendant, James Daniel Thomas, filed a counterclaim
alleging several theories for relief and claiming that the real estate
consisting of approximately 52 acres located on Cotton Grove Road
in Madison County, Tennessee was his or in the alternative; that he
had a right to purchase the same at a given price and further alleged
that he owned the property by virtue of a resulting trust and by
adverse possession.
From all of the testimony of witnesses and evidence produced
in open Court the Court finds that the Plaintiff is the true owner of the
52 acres located on Cotton Grove Road in Madison County,
Tennessee. The Defendant, James Daniel Thomas has no claim or
right to possess or own said property. The Court further finds that the
Plaintiff, Patsy C. Cate, had owned the property since 1990 and that
the Defendant, James Daniel Thomas, had not paid the rent as set

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forth in the Lease Agreement, which had been executed at the time of
the purchase of the property by the Plaintiff, Patsy C. Cate; nor had
he continued to pay the rent. The Court further finds that Defendant,
James Daniel Thomas, constructed without the knowledge or
approval of the Plaintiff [] certain out buildings, ponds, lakes,
bridges, gates, fences, etc., upon said property. The Court finds that
these improvements to the property belong to the property owner, the
Plaintiff, Patsy C. Cate. The Court further finds that the Defendant,
James Daniel Thomas, may remove from the property his mobile
home and any items not affixed to the property. The Court further
finds that the Defendant, James Daniel Thomas, has come into this
Court with unclean hands and has asked this Court to assist him in his
attempt to claim the right to own or purchase said property. His claim
is therefore denied. The Court further finds that upon the execution
of the lease contract in 1990 by the Defendant, James Daniel Thomas,
he agreed to pay to the Plaintiff any sums of money expended for an
attorney for the enforcement of the terms of the lease. The Court
finds that Mr. Thomas has by his attempt to make a claim to the
property and refusal to remove himself from the property caused the
Plaintiff to expend money and time in the prosecution of the suit and
that all said fees having been incurred by the Plaintiff shall be
reimbursed by the Defendant. The Court finds that the Plaintiff’s
attorney shall submit to the Defendant’s attorney a statement of
services and charges incurred in the prosecution of this suit together
with unpaid rent and that in the event an agreement cannot be reached
in the amount to be paid by the Defendant that the matter may be
presented to this Court for the final determination by this Court.

WHEREFORE the Court orders that the Plaintiff is entitled
to any past due rent on the property; that the Defendant remove
himself and his personal property from the 52 acres located on Cotton
Grove Road in Madison County, Tennessee and that he leave
undisturbed any permanent buildings or fixtures attached to the land.
It is further ordered by the Court that Plaintiff is due any past due rent
on the property together with attorney fees incurred by virtue of the
legal action to remove the Defendant; that the Defendant shall pay to
the Plaintiff the amounts which she has been forced to expend to
remove the Defendant from said land together with unpaid rent. The
Court further orders that the Defendant be charged with the cost of
this action for all of which let execution issue.

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By Order of May 6, 2005, the trial court ordered a stay of execution on the judgment for fees and
rents contingent upon Mr. Thomas providing a good and sufficient bond. Mr. Thomas appeals and
raises two issues for review as stated in his brief:

A. Did the Chancery Court err when it decreed that the Appellee was
the true and absolute owner of the property in question, although the
Appellee issued a fraudulent deed and lease to the Appellant;
prepared the documents to perpetuate a fraud upon creditors solely to
protect Appellee’s interest after her failure to execute a deed of trust
in the original transaction; disregarded the terms of the fraudulent
lease; and followed the terms of the original sale for approximately
fifteen (15) years?

B. Did the Chancery Court err when it refused to allow parol
evidence of the oral agreements between Appellant and Appellee’s
husband?

We first note that, since this case was tried by the court sitting without a jury, we review the
case de novo upon the record with a presumption of correctness of the findings of fact by the trial
court. Unless the evidence preponderates against the findings, we must affirm absent error of law.
See Tenn. R. App. P. 13(d). Furthermore, the weight, faith, and credit to be given to any witness'
testimony lies in the first instance with the trier of fact, the jury in this cause, and the credibility
accorded will be given great weight by the appellate court. Kim v. Boucher, 55 S.W.3d 551
(Tenn.Ct. App.2001).

In the case at bar, Ms. Cate asserts ownership of the Property by the 1990 Deed. Mr. Thomas
asserts that the deed was, in fact, never meant to be enforced and/or that same was obtained through
some form of fraud. Consequently, he contends that the 1990 Deed should be set aside.

We first note that Mr. Thomas, in his brief, relies upon T.C.A. § 66-3-101 (2004) entitled
“Conveyances in fraud of creditors or purchasers void.” This statute provides that a conveyance of
land made with the intent or purpose to delay, hinder or defraud creditors is void. Mr. Thomas’
reliance upon this statute is misplaced. In the first instant, Mr. Thomas is not a creditor but is, in
fact, a party to the conveyance. By his own admission in court, he voluntarily signed the 1990 Deed,
to wit:

Q. You’ve admitted that you [Mr. Thomas] signed this deed [the
1990 Deed], didn’t you?

A. Yes, sir, I did sign it.

Q. Your wife signed the deed?

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 A. That is correct.

Q. And you were under no compulsion to sign this deed in May of
1990, right?

A. That’s correct. I signed it.

Q. You and your wife?

A. Yes, sir.

Having entered into this 1990 conveyance without compulsion, Mr. Thomas cannot now come
before the court to undo what he voluntarily did. Concerning the “badges or fraud” that Mr. Thomas
asserts are evident in this case, even if we assume arguendo (which we do not) that these factors are
supported by the evidence, we can only conclude from the evidence that Mr. Thomas was an equal
participant in the fraud. Furthermore, from Mr. Thomas’ own testimony, as set out above, it appears
that there was no fraudulent inducement. However, even if we assume arguendo that the Cates
somehow induced Mr. Thomas to enter into an arrangement that was more advantageous to the
Cates, the trial court specifically found that the Cates’ explanation of events was more credible than
Mr. Thomas’ account, to wit:

I’m [the court] specifically finding here that the plaintiff’s [Ms.
Cates’] explanations of the events surrounding the payments,
surrounding everything that transpired, are more credible than the
defendant’s [Mr. Thomas’] explanation. As a result of that, I find the
testimony of the plaintiff to be more credible than that of the
defendant.

Because the trial judge is in a better position to weigh and evaluate the credibility of the witnesses
who testify orally, the weight, faith, and credit to be given to any witness's testimony lies in the first
instance with the trier of fact, and the credibility accorded will be given great weight by the appellate
court. In re Estate of Walton v. Young, 950 S.W.2d 956, 959 (Tenn.1997). We have reviewed the
entire record in this case and find nothing to disturb the trial court’s findings concerning the
credibility of these witnesses.

Mr. Thomas further argues that the 1990 Deed should be set aside because there was
inadequate consideration for the transfer. Whether a conveyance has been made for a fair
consideration is generally a question of fact. Mid-South Bank & Trust Co. v. Paul Max Quandt
Estate, 1995 WL 614322 (Tenn. Ct. App. Oct. 20, 1995) (citing American Investment Bank v.
Marine Midland Bank, 595 N.Y.S.2d 537,538 (A.D. 2 Dept.1993); Hove v. Frazier, 115 N.W.2d
217, 219 (S.D.1962); Sills v. Morgan, 9 S.E.2d 518 (N.C.1940)). Fair consideration is defined in
T.C.A. § 66-3-304 (2004) as follows: "Value is given for a transfer or an obligation if, in exchange
for the transfer or obligation, property is transferred or an antecedent debt is secured or satisfied....”

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Here, the trial court specifically found that “consideration for the transfer of the property back to
[Ms. Cate] was the forgiveness of the debt owed [by Mr. Thomas] on the property.” While there is
some dispute in the record as to whether the 1987 Note was forgiven at the time of the 1990 transfer,
or whether (as asserted by Mr. Thomas) the parties continued to operate under the original payment
schedule outlined in the 1987 Note, the record does not preponderate against the trial court’s finding
that the 1987 indebtedness was forgiven in consideration for the 1990 transfer of the Property back
to the Cates.

Having found that the 1990 conveyance was not based upon fraud or, in the alternative, that,
if there was fraud, Mr. Thomas was a participant in that fraud, we are left with the documents that
were executed–that is the 1990 Deed and the Lease. In his second issue, Mr. Thomas contends that
the trial court erred in not allowing parol evidence concerning any oral agreement(s) between Mr.
Cate and Mr. Thomas. It is well settled in Tennessee that "in the absence of ambiguity or
irreconcilable conflict in the provisions of a deed, parol evidence is not admissible to contradict, add
or explain the provisions of the deed." Rolen v. Rolen, 423 S.W.2d 280, 282 (Tenn. Ct. App.1967).
We have reviewed the 1990 Deed and the Lease, and neither document is ambiguous on its face.
Consequently, the trial court did not err in excluding parol evidence in this case.

By its plain language, the 1990 Deed transfers ownership of the Property (and “all
improvements thereon”) to the Cates. As discussed above, the Deed was signed by Mr. Thomas and
his then wife, and was entered into “under no compulsion.” Likewise, the Lease clearly indicates
that Mr. Thomas is to pay $125 per month in rents. Under this same Lease, Mr. Thomas had an
exclusive option to purchase the Property for $46,400.00 (i.e. the amount owed under the original
1987 Note at the time of the 1990 transfer). Mr. Thomas testified that the Lease Agreement was the
only contract that existed between himself and the Cates. He further testified that he did not exercise
the option to purchase under the Lease, to wit:

Q. But you [Mr. Thomas] do admit that you have no other contract
than the lease contract, right?

A. That is correct.

Q. That’s the only contract you have?

A. That’s correct.

Q. You didn’t exercise your option.

A. I tried several times to exercise my option.

Q. Well, Mr. Thomas, you didn’t exercise the option, did you?

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 A. No.There is no indication that Mr. Thomas ever sued to enforce
the purchase option under the Lease agreement. The only evidence
is that he did not exercise same. Consequently, at the expiration of
the lease term, Mr. Thomas became a tenant at will on the Property
owned by the Cates. In his testimony, Mr. Thomas admits that he
never paid the $125 monthly rent, to wit:

Q. It [the Lease] demanded a monthly lease payment of $125. Did
you ever pay $125?

A. No, ma’am.

Rather, Mr. Thomas asserts that he was still operating under the 1987 Note. Ms. Cate, on the other
hand, testified that the parties were operating under the Lease from 1990 on. The testimony and
evidence concerning the payments made by Mr. Thomas do little to resolve this conflict because the
records of the payments were compiled, for the most part, in anticipation of this litigation.
Furthermore, any amounts over $125 that Mr. Thomas paid are explained, by Ms. Cates’ testimony,
as “catch-up” for past due rents. From the record before us, we conclude that Mr. Thomas was in
arrears on his rent pursuant to the Lease, that Ms. Cate was the sole owner of the property under the
1990 Warranty Deed and by operation of law following Mr. Cate’s death. Given the fact that Mr.
Thomas was a tenant at will, who, by his own testimony, failed to pay the rent due, Ms. Cate was
entitled to possession of the Property and rents. Furthermore, Mr. Thomas’ statute of limitations
argument is untenable. The proof is that, at the time Ms. Cate filed suit, Mr. Thomas was
approximately $500 in arrears on rent. The applicable statute of limitations is six (6) years from the
date the action accrues, pursuant to T.C.A. §28-3-109 (2004). Here, the action accrued when Mr.
Thomas failed to pay his rent. There is no indication in this record that Ms. Cate waited anywhere
near six years to file suit.

For the foregoing reasons, we affirm the Decree of the trial court. Costs of this appeal are
assessed against the Appellant, James Daniel Thomas, and his surety.

__________________________________________
W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.

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