IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
JULY 21, 2004 Session
IN RE: THE ESTATE OF JOAN M. HAWKINS, DECEASED
JAN RECTOR & SARA TUCKER
v.
FRANK DANIEL MURCHISON, JR.
Direct Appeal from the Probate Court for Shelby County
No. C-3697 Donn Southern, Judge
No. W2003-02279-COA-R3-CV - Filed December 16, 2004
This case arises out of a petition filed by Appellants to compel the executor of Decedent’s estate to
collect certain assets and a petition for declaratory judgment filed by Appellee. The trial court
determined that Appellants’ motion in limine to exclude certain evidence based on the parol evidence
rule should be denied. Additionally, the trial court denied Appellants’ objection to certain testimony
based on the statute of frauds. The trial court further denied Appellants’ objections to exclude
testimony based on the Dead Man’s Statute. The trial court determined that Decedent successfully
gifted annual $10,000 sums to Appellee in the form of forgiving interest and principal owed by
Appellee to Decedent as stated in a promissory note, finding there was clear, cogent, and convincing
evidence to rebut the presumption that such transfers were advancements. Further, the court
determined that such promissory note called for simple, rather than compound, interest, finding that
Appellee owed Decedent’s estate the sum of $64,297.78. Appellants seek review by this Court and,
for the following reasons, we affirm.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Probate Court Affirmed
ALAN E. HIGHERS, J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and HOLLY M. KIRBY , J., joined.
W. Chris Harrison, J. Anthony Bradley, Memphis, TN, for Appellants
Blanchard E. Tual, Kelly P. Bridgforth, Memphis, TN, for Appellee
OPINION
Facts and Procedural History
Joan Murchison Hawkins (“Decedent”) has four children, Jan Elizabeth Murchison Rector
(“Jan”), Sara Jo Murchison Tucker (“Sara” or collectively with Jan, the “Appellants”), Frank Daniel
Murchison, Jr. (“Danny” or “Appellee”), and Nancy Jean Murchison Jones (“Nancy”), from her
marriage to her deceased husband, Frank Hawkins, Sr. (“Frank”). After Frank died, Decedent
remarried Luther B. Hawkins, Jr. (“Luther”), in 1991. Luther and Decedent lived in separate homes,
but after they married, Decedent decided to move into Luther’s home in Cordova, Tennessee. As
a result, Decedent desired to sell her home at 2370 Paper Birch Lane (the “Paper Birch house”) to
Danny, and on three occasions, Danny turned down Decedent’s attempts, explaining that he could
not afford the payments on the Paper Birch house at that time.
Ultimately, Decedent reached an agreement with Danny and his wife, Kathryn B. Murchison
(“Kathy”), for the sale of the Paper Birch house. On May 2, 1991, Danny and Kathy signed a
Promissory Note (the “Note”) and a Deed of Trust (the “Deed of Trust”) securing such Note. The
pertinent provisions of the Note provide the following:
For value received, We promise to pay to the order of Joan Head
Murchison/Hawkins the principal sum of One Hundred Twenty Six Thousand Five
Hundred ($126,500.00) Dollars,1 together with interest thereon at a rate of 9 per cent
per annum from date until maturity, each unpaid installment of principal and interest
to bear interest at the rate of 9 per cent per annum after maturity.
Said principal and interest are payable in installments in the following
manner, to wit: Six Hundred and No/100 ($600.00) Dollars on the 1st day of August,
1991, and a like amount on the first day of each month thereafter until payment in
full.2
....
This note is secured by a deed of trust on real estate, of even date herewith,
recorded in the office of the Register of Shelby County, Tennessee.
1
Though the Paper Birch house was appraised at $172,500 and held a sale price of $172,000, the closing
statement for the sale of the house denotes that an allowance of $17,500 was given to Danny and Kathy for repairs to
the wiring of the home, the city and county taxes on the house (totaling $618) were subtracted from the sale price, and
a “gift” was given to Danny and Kathy in the amount of $27,382, which worked to reduce the amount of indebtedness
on the Note to $126,500.
2
W e are mindful that such an arrangement in the Note creates negative amortization, meaning that the
monthly payments of $600 are inadequate to fulfill the interest obligation accruing at 9% per annum.
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Additionally, Decedent executed a warranty deed dated May 2, 1991, conveying the Paper Birch
house to Danny and Kathy. Though the Note provided that payments were to begin on August 1,
1991, and Danny and Kathy moved into the Paper Birch house in May 1991, Danny and Kathy did
not begin making the $600 monthly payments until July 1992, because they were unable to sell their
previous home until that time and could not afford to make payments on two houses. There was
testimony by John M. Walker (“Mr. Walker”), Decedent’s certified public account and executor of
Decedent’s estate, that Decedent gifted the missed payments from August 1991 to July 1992 by
forgiving them and would not charge Danny and Kathy any payments until they sold their previous
house. Danny further corroborated such testimony, stating that it was his understanding that these
payments from May 1991 until July 1992 were forgiven. Therefore, Danny and Kathy paid $3,600
in interest in 1992 and $7,200 every year afterward. On her income tax returns, Decedent reported
only the payments made by Danny and Kathy as interest income.
On April 26, 1991, prior to the closing on the Paper Birch house, Decedent executed a Will,
containing the following provision:
I have heretofore executed a Warranty Deed conveying my former home as
[sic] 2370 Paper Birch Lane in Memphis, Shelby County, Tennessee, to my son,
Frank Daniel Murchison, Jr., and his wife, Katherine B. Murchison, at an agreed and
fairly appraised price of $172,000. In turn, my son and wife executed a Trust Deed
and a Promissory Note to me for $126,500.00 at nine per cent per annum interest.
None of the difference or balance of $55,500.00 was paid to me by my son. At the
time of this transfer of this real property, I made a transfer to him of $45,500.000 as
an advancement against his one-fourth share of my interest in my home at 2370 Paper
Birch Lane. In addition thereto, I also made an advancement of $10,000.00 to him
making a total of $55,500.00 as the credit towards the purchase of this property and
representing the entire down-payment. By agreement, I will continue to give Frank
Daniel Murchison and [sic] additional annual credit of $10,000.00 on the note and
Trust Deed until either the house is paid in full or I die. This $45,500.00 and the
initial $10,000.00 plus $10,000.00 annually is to be credited to him on June 1st of
each and every year beginning in the year of 1992 and is to be charged against his
share of my estate and all is considered as an advancement and to be deducted from
whatever proceeds of my estate Frank Daniel Murchison would inherit. Frank Daniel
Murchison agreed in the Promissory Note to pay me $600.00 per month towards the
initial indebtedness of $126,500.00 and each monthly payment is to be used towards
reducing the debt he owes me. When Frank Daniel Murchison satisfies this debt of
$126,500.00 by the monthly payments of $600.00 and the annual additional gifts of
$10,000.00 plus any other additional payments he wants to make, then I or my
executor will execute the necessary release deed cancelling this trust debt and lien
against this property.
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On July 11, 1998, Decedent executed a holographic Will which, after stating it takes precedence
over all prior Wills executed by Decedent, articulates the following statement regarding Danny’s
indebtedness:
The estate is to be divided equally among my four children. In the event of
the death of one of my children, that child’s offspring (children) share equally in his
or her estate.
....
My son, Frank Daniel Murchison, Jr. owes each of his sisters 1/4 of the
amount owed me for 2370 Paper Birch at the time of my death. That is to be paid to
them from his share of the estate.
Finally, later in 1998, Decedent retained James T. Lowry, an attorney, to draft another Will, which
Decedent executed on October 1, 1998. After revoking all of Decedent’s prior Wills and Codicils,
the October Will makes no mention of any agreement with Danny or any debt Danny owes Decedent.
Instead, the Will has a residuary clause which provides as follows:
Outright Gift of All Property to Children. I give, devise and bequeath all the
rest, residue and remainder of my property of every kind and description (including
lapsed legacies and devises) wherever situate and whether acquired before or after
the execution of this Will, absolutely in fee simple to my surviving children, in equal
shares, provided, however, the then living issue of a deceased child of mine shall take
per stirpes the share their parent would have taken had he or she survived me.
Decedent died on February 27, 2001, at the age of seventy-four. On December 31, 2001,
Appellants filed a Petition to Compel Executor to Collect Assets of the Estate, seeking an order from
the probate court requiring the executor to collect the balance due under the Note and distribute such
amount in accordance with Decedent’s Last Will and Testament. On January 7, 2002, Appellee filed
a Petition for Declaratory Judgment, seeking a determination of the amount due under the Note
which considers the fact that Decedent allegedly forgave $10,000 of the amount due under the Note
each year until her death as an outright gift. After a hearing on this matter, the trial court determined
that the Note called for simple interest, Decedent made outright annual gifts of $10,000 to Appellee
in the form of forgiving a portion of the principal balance on the Note, and, consequently, Appellee
owed Decedent’s estate the sum of $64,297.78. Appellants seek review from this Court and present
the following issues for our review:
I. Whether the trial court erred when it denied Appellants’ motion in limine and
allowed parol evidence of Decedent’s Wills and alleged advancements or gifts by
Decedent despite the existence of a Note and Deed of Trust detailing the sale of the
Paper Birch house;
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II. Whether the trial court erred when it denied Appellants’ objections based on the
Dead Man’s Statute;
III. Whether the trial court erred when it denied Appellants’ defense of the statute of
frauds and allowed evidence of alleged oral advancements or gifts;
IV. Whether the trial court erred when it found that Decedent intended to give and
delivered outright gifts to Appellee in the form of the $10,000 credits on the Note;3
V. Whether the trial court erred when it allowed the expert testimony of John M.
Walker, Decedent’s certified public accountant, over Appellants’ objections of lack
of disclosure and lack of qualification; and
VI. Whether the trial court erred when it determined the amount owed under the Note
should be computed using simple, rather than compound, interest, resulting in an
amount of $64,297.78 due under the Note.
For the following reasons, we affirm.
Standard of Review
“[R]eview of findings of fact by the trial court in civil actions shall be de novo upon the
record of the trial court, accompanied by a presumption of the correctness of the finding, unless the
preponderance of the evidence is otherwise.” Tenn. R. App. P. 13(d). For questions of law, this
Court’s scope of review is de novo with no presumption of correctness for the trial court’s
conclusions of law. Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993) (citing
Estate of Adkins v. White Consol. Indus., Inc., 788 S.W.2d 815, 817 (Tenn. Ct. App. 1989)).
Parol Evidence Rule
As an initial matter, Appellants present this Court with various evidentiary issues we must
resolve before addressing the substantive issues. First, Appellants argue that the trial court erred
when it admitted evidence of an “agreement” between Decedent and Danny to forgive $10,000 of
the Note each year, when the agreement between the parties is contained in the Note and Deed of
Trust in clear and unambiguous terms. To admit such evidence, Appellants argue, violates the parol
evidence rule.
The general rule in Tennessee is that parol evidence is inadmissible to contradict or vary the
terms of a written agreement. Starnes v. First Am. Nat’l Bank of Jackson, Tenn., 723 S.W.2d 113,
117 (Tenn. Ct. App. 1986) (citing Maddox v. Webb Constr. Co., 562 S.W.2d 198 (Tenn. 1978);
Santa Barbara Capital Corp. v. World Christian Radio Found., Inc., 491 S.W.2d 852 (Tenn. Ct.
App. 1972)). However, parol evidence may be used to prove the existence of an independent
collateral agreement. Id. (citing Early v. Street, 241 S.W.2d 531 (Tenn. 1951)). The Tennessee
3
The Appellants make no argument concerning the treatment of the $55,500 down-payment, and,
therefore, we do not address it in this opinion.
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Supreme Court has further elaborated on how to determine whether an oral agreement is separate
and distinct from, or collateral to, an agreement in writing:
In answering this question it seems to us that the authors of A.L.R. have given a very
practical and satisfactory answer when they say that the “test for determining whether
the alleged oral agreement is distinct and separate from the contract evidenced by the
writing, so as to permit proof thereof by parol or extrinsic evidence not inconsistent
with or contradictory to the writing, is whether the oral agreement is one which,
considering the circumstances of the parties, the subject-matter, and the nature of the
writing, would ordinarily have been embodied in the written instrument, had the
parties intended that they should be bound thereby.” 70 A.L.R. 759.
Early, 241 S.W.2d at 535.
It appears to this Court that any such credits from Decedent to Appellee, whether
characterized as a gift or an advancement, would not act to contradict or vary the terms of the Note
or the Deed of Trust. As the trial court noted, the Note and Deed of Trust “do not relate to gifts or
refer to gifts” and make no reference to any future credits between Decedent and Appellee.
Therefore, such future credits given by Decedent to Appellee could not alter or contradict any terms
in the Note or Deed of Trust. In addition, we note that, given that the subject matter involves either
gifts or advancements, the writing is a promissory note, and an agreement of future gifts or
advancements is a subject that would not ordinarily be embodied in such a writing. Therefore, any
“agreement” between Decedent and Appellee would appear to be separate and distinct from the
agreement contained in the Note and Deed of Trust.
Additionally, we note that, even if the credits did vary or contradict the Note and Deed of
Trust such that the parol evidence rule would apply, the credits involved transactions which occurred
subsequent to the execution of the Note and Deed of Trust. “[T]he parol evidence rule does not
forbid the introduction of evidence of an agreement made subsequent to the execution of the writing,
although the effect of the subsequent agreement might add to, change, modify or abrogate the
contract as evidenced by the writing.” Starnes, 723 S.W.2d at 118 (citing Brunson v. Gladish, 125
S.W.2d 144 (Tenn. 1939)). The testimony at trial is undisputed that all such credits occurred, if at
all, at some point subsequent to the execution of the Note and Deed of Trust. Therefore, if such
credits altered or modified the Note or Deed of Trust within the contemplation of the parol evidence
rule, the rule would not apply because any and all credits occurred after the Note and Deed of Trust
were executed.
Finally, though Decedent’s Will is dated April 26, 1991, and was executed by Decedent
before Appellee signed the Note and Deed of Trust, such prior writing does not constitute a contract
or an agreement such that the parol evidence rule would apply to exclude any evidence of credits
given to Appellee by Decedent. Rather, the 1991 Will, as the trial court determined, “reflects an
understanding of a plan at the time but not a contract or agreement.” This is supported by the
testimony of Kathy, who stated she was unaware of what was in the 1991 Will when it was written,
and Danny, who stated that he did not see any of Decedent’s Wills until after she died. Therefore,
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the admission of the 1991 Will, and the admission of the testimony relating to subsequent credit
transfers from Decedent to Appellee, were not in violation of the parol evidence rule.
Dead Man’s Statute
Next, Appellants argue that the trial court erred when it admitted evidence of statements by
Decedent that she gave credits on the Note of $10,000 per year as outright gifts to Appellee. Section
24-1-203 of the Tennessee Code articulates Tennessee’s version of the Dead Man’s Statute:
In actions or proceedings by or against executors, administrators, or guardians, in
which judgments may be rendered for or against them, neither party shall be allowed
to testify against the other as to any transaction with or statement by the testator,
intestate, or ward, unless called to testify thereto by the opposite party. If a
corporation is a party, this disqualification shall extend to its officers of every grade
and its directors.
Tenn. Code Ann. § 24-1-203 (2000). Further, we note that “[t]he courts of this State have taken
the view that our statute must be strictly construed as against the exclusion of the testimony and
in favor of its admission.” Baker v. Baker, 142 S.W.2d 737, 744 (Tenn. Ct. App. 1940) (citing
Montague v. Thomason, 18 S.W. 264 (Tenn. 1891); Rielly v. English, 77 Tenn. 16 (Tenn. 1882);
Hughlett v. Conner, 59 Tenn. 83 (Tenn. 1873)).
Initially, we note that, because the Dead Man’s Statute eliminates the testimony of only a
party to an action by or against an executor of an estate, it is clear that all witnesses except Danny
and Mr. Walker are outside the scope of the Dead Man’s Statute, because none of them could be
considered a “party” to the suit as instituted against Decedent’s estate. Next, with regard to Mr.
Walker’s testimony, we note that his testimony falls outside of the scope of the Dead Man’s Statute.
Mr. Walker is the executor of the estate and was called as a fact and expert witness. His testimony
was elicited by Appellee, who filed a petition for declaratory judgment against Decedent’s estate.
See Atchley v. Rimmer, 255 S.W. 366, 369 (Tenn. 1923). Therefore, Mr. Walker is a party who was
“called to testify thereto by the opposite party,” and his testimony was properly admitted over
Appellants’ objections based on the Dead Man’s Statute.
Finally, we note that it appears Appellee’s testimony should have been excluded based on
the Dead Man’s Statute. Appellee sought a declaratory judgment from the trial court to establish a
lesser liability on the Note exhibiting an indebtedness to Decedent’s estate. There is no question that
portions of Appellee’s testimony related to transactions or statements by Decedent. Finally, we note
that Appellee was called to testify by Appellants and not the estate, and Appellee’s interest in
reducing his liability on the Note is contrary to the estate. Therefore, it cannot be said that Appellee
was called to testify by the “opposite party” such that the Dead Man’s Statute would not apply.
However, the record indicates the trial court relied not only on Appellee’s testimony, but the
testimony of all witnesses and the trial exhibits. After reviewing the record, we conclude that such
error by the trial court in admitting Appellee’s testimony concerning the statements of Decedent was
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harmless because the judgment is supported by evidence other than such incompetent evidence and
there is no material evidence to the contrary with respect to statements by Decedent. See Durham
v. Webb, 330 S.W.2d 355, 359 (Tenn. Ct. App. 1959). For these reasons, we cannot say that the trial
court committed reversible error when it determined the Dead Man’s Statute did not apply to the
testimony of the witnesses, concerning statements made by Decedent evidencing an alleged gift or
advancement to Appellee.
Statute of Frauds
Appellants’ final evidentiary issue concerns the statute of frauds. Specifically, because the
indebtedness at issue that was allegedly forgiven is a debt for the transfer of real property, Appellants
contend that such a transfer must be in writing pursuant to the statute of frauds which provides as
follows:
(a) No action shall be brought:
(1) To charge any executor or administrator upon any special promise to answer any
debt or damages out of such person’s own estate;
(2) To charge the defendant upon any special promise to answer for the debt, default,
or miscarriage of another person;
(3) To charge any person upon any agreement made upon consideration of marriage;
(4) Upon any contract for the sale of lands, tenements, or hereditaments, or the
making of any lease thereof for a longer term than one (1) year; or
(5) Upon any agreement or contract which is not to be performed within the space of
one (1) year from the making of the agreement or contract;
unless the promise or agreement, upon which such action shall be brought, or some
memorandum or note thereof, shall be in writing, and signed by the party to be
charged therewith, or some other person lawfully authorized by such party.
Tenn. Code Ann. § 29-2-101(a) (2000).
As noted above in our discussion of the inapplicability of the parol evidence rule, we do not
believe the statute of frauds should apply to these facts. The transfer of the Paper Birch house, which
falls under section 29-2-101(a)(4) of the Tennessee Code, was memorialized in writing with the
warranty deed, Note and Deed of Trust. However, the transaction at issue concerns either a gift or
an advancement in the form of forgiveness of a debt, neither of which is encompassed by the statute
of frauds.
Additionally, Appellants argue that Appellee and Decedent had an agreement of gifting,
constituting a contract which could not be performed within the space of one year. We disagree.
At no point was there a binding contract or agreement that Decedent would give Appellee $10,000
per year either as a gift or an advancement. As the trial court determined, Decedent and Appellee
had only an understanding of what would occur in the future. Decedent could have at any time
refused to continue to forgive Appellee’s debt. Therefore, there was no “agreement or contract”
between the parties, and section 29-2-101(a)(5) of the Tennessee Code does not apply. For these
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reasons, we affirm the trial court’s decision that the statute of frauds is inapplicable to the facts of
this case.
Evidence of a Gift
Next, Appellants argue that the trial court erred when it found that Decedent intended and
delivered outright gifts to Appellee of $10,000 each year after the sale of the Paper Birch house in
the form of forgiving Appellee’s indebtedness to Decedent as memorialized in the Note executed
by Appellee. Appellee contends that the evidence established the necessary elements for an outright
gift in the form of forgiving the debt.
In Tennessee, a party claiming a gift has the burden of proving two essential elements:
donative intent and delivery. In re Estate of Garrett, No. M1999-01282-COA-R3-CV, 2001 Tenn.
App. LEXIS 764, at *28-29 (Tenn. Ct. App. Oct. 12, 2001) (citing In re Estate of Bligh, 30 S.W.3d
319, 321 (Tenn. Ct. App. 2000)). Delivery of a gift may be either actual or constructive. Atchley,
255 S.W. at 371. Additionally, we note that the party claiming a gift must prove these elements by
“clear, cogent and convincing evidence.” In re Estate of Garrett, 2001 Tenn. App. LEXIS 764, at
*29 (citing Bligh, 30 S.W.3d at 321). “Any doubt must be resolved against the gift.” Id. (citing
State ex rel. Teague v. Home Indem. Co., 442 S.W.2d 276 (Tenn. Ct. App. 1967)).
Our review of Tennessee jurisprudence reveals no prior case with like circumstances.
However, we note that, in general, “[a] debt may be the subject of a gift by a creditor to his or her
debtor.” 38 Am. Jur. 2d Gifts § 45 (1999) (citations omitted); see also 38A C.J.S. Gifts § 48 (1996).
Additionally, such gift in the form of forgiveness requires not only donative intent, but also “some
objective act which extinguishes the debt or divests the creditor of his or her title thereto, such as the
cancellation, surrender, or destruction of the instrument evidencing the debt, or the execution of a
release, receipt, or satisfaction evidencing the extinguishment of the debt.” 38 Am. Jur. 2d Gifts §
45 (1999) (citations omitted); see also 38A C.J.S. Gifts § 48 (1996); C.R. McCorkle, Annotation,
Gift of Debt to Debtor, 63 A.L.R. 2d 259 (1959). Additionally, this type of gift “may be effectuated
. . . by other means, such as . . . instructions to a third person as to the disposition of the obligation
. . . .” C.R. McCorkle, Annotation, Gift of Debt to Debtor, 63 A.L.R. 2d 259 (1959) (citations
omitted).
The Tennessee Supreme Court has held that the cancellation of a note does not have to be
in writing. Henson v. Henson, 268 S.W. 378, 380 (Tenn. 1924). However, in Henson, the court
addressed the circumstance where the creditor/decedent directed his wife to destroy the notes
evidencing the indebtedness of the debtor, and the wife carried out this instruction. Id. at 378. “A
gift of a debt to the debtor cannot ordinarily be effectuated by a mere verbal declaration.” 38 Am.
Jur. 2d Gifts § 45 (1999) (citations omitted); see also Atchley v. Rimmer, 255 S.W. 366, 372 (Tenn.
1923) (stating that, in the case requiring the actual delivery of a note, “the declarations of a donor
that he had given the property in controversy to the claimant thereof will not perfect a gift incomplete
for want of actual delivery, and the fact of delivery must be shown by other evidence than the mere
declaration of the donor.”).
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In this case, Appellee sought to prove the existence of outright gifts in the form of the
$55,500 down-payment at the time of the sale of the Paper Birch house and the $10,000 annual
credits on the home for each year until the year 2000. The trial court found that such amounts were
intended to be outright gifts by the Decedent to Appellee and reduced the amount due on the Note
to reflect this intention. Under the facts and circumstances of this case, we agree with the trial
court’s finding that there was clear, cogent and convincing evidence that such credits were outright
gifts.
Initially, we note that there is no written evidence in the form of an executed release, receipt
or satisfaction of these credits. The only written evidence in the record to establish the existence of
the credits is Decedent’s 1991 Will. That Will states that such credits were to be treated as
“advancements” and were to be charged against Appellee’s share of Decedent’s estate. However,
Decedent instructed her certified public accountant, Mr. Walker, to “credit” the balance due on the
Note by $10,000 each year until the year 2000. Kathy further testified that Decedent told her of the
instructions to Mr. Walker. Additionally, there was testimony by Mr. Walker that he advised
Decedent of the $10,000 annual exemption from the federal gift tax.4 Further, Decedent revoked her
1991 Will when she executed her 1998 holographic Will and 1998 attested Will, establishing her
intention to revoke the characterization of the prior credits as “advancements.” In addition, there
was evidence that Appellee and his family could not afford to purchase the Paper Birch house,
necessitating smaller payments on the interest and resulting in negative amortization on the Note.
Such evidence may be construed to establish an intent on the part of Decedent to treat the alleged
credits as outright gifts.
Though a written release, receipt, or satisfaction executed by Decedent as donor and given
to Appellee as donee would have firmly established constructive delivery of an outright gift of this
nature, we agree with the trial court that, under the circumstances of this case, the actions and
statements of the Decedent are adequate proof, by clear, cogent, and convincing evidence, of
constructive delivery and, therefore, outright gifts in the form of forgiveness of the debt. The
testimony of various witnesses, interested and disinterested alike, was that Decedent made
declarations to the effect that she was forgiving $10,000 of Appellee’s indebtedness each year. This
included instructions by Decedent to Mr. Walker, her certified public accountant, that she wished
to reduce Appellee’s indebtedness on the Note by $10,000 each year. Additionally, Decedent’s 1991
Will, which refers to such credits as advancements, was revoked by the terms of her 1998
holographic Will and 1998 attested Will. For these reasons, we affirm the trial court’s finding that
the alleged transfers were outright gifts from Decedent to Appellee.
John Walker’s Expert Testimony
Next, Appellants argue that the trial court erred when it permitted Mr. Walker, Decedent’s
certified public accountant, to testify as to the value of the Note, specifically whether the Note
4
During the time period involved in this case, the annual exclusion amount for gifts was $10,000
pursuant to 26 U.S.C. § 2503.
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required simple or compound interest, due to Appellee’s lack of disclosure of Mr. Walker as an
expert witness and Mr. Walker’s lack of qualification as an expert.
As an initial matter, we note that “questions regarding the admissibility, qualifications,
relevancy and competency of expert testimony are left to the discretion of the trial court.” McDaniel
v. CSX Transp., Inc., 955 S.W.2d 257, 263 (Tenn. 1997) (citing State v. Ballard, 855 S.W.2d 557,
562 (Tenn. 1993)). In this case, Mr. Walker testified that he had worked as a certified public
accountant since 1961, he held his Bachelor of Science degree in accounting from the University of
Southern Mississippi, and he had experience in reviewing promissory notes over his tenure as an
accountant, classifying such documents as “common” in his profession. Additionally, Mr. Walker
stated in his deposition that he routinely prepared amortization schedules for promissory notes.
Under the circumstances of this case, we cannot say that the trial court abused its discretion when
it determined Mr. Walker was qualified to testify as an expert witness with regard to the manner in
which interest would be calculated on the Note.
Next, Appellants argue that the trial court erred when it allowed Mr. Walker to testify as to
whether the Note called for simple or compound interest when Appellee had not stated that Mr.
Walker would be utilized as an expert witness during discovery. As previously stated by the
Tennessee Supreme Court, “[n]o sanctions against a party are provided for the failure to ‘seasonably’
supplement a response to an interrogatory requesting the identity of expert witnesses expected to
testify at trial.” Lyle v. Exxon Corp., 746 S.W.2d 694, 699 (Tenn. 1988). “Excluding the testimony
of an expert witness may be an appropriate sanction for failure to name the witness.” Id. (emphasis
ours). “To determine the proper sanction,
[T]he trial judge should consider:
1. The explanation given for the failure to name the witness;
2. The importance of the testimony of the witness;
3. The need for time to prepare to meet the testimony; and
4. The possibility of a continuance.”
Id. (citing Strickland v. Strickland, 618 S.W.2d 496, 501 (Tenn. Ct. App. 1981)).
In this case, we note that, in Appellants’ request for the identity of expert witnesses testifying
on behalf of Appellee, Appellee lists the identity of Mr. Walker. Additionally, Mr. Walker had a
deposition taken prior to trial in which he testified to what he believed the value of the Note was and
included an amortization schedule for the Note. Therefore, we cannot say that the trial court abused
its discretion when it admitted the testimony of Mr. Walker concerning the interest called for in the
Note.
As an ancillary matter, we note that, after reviewing the record, even if the trial court erred
in admitting Mr. Walker’s testimony regarding the interest called for by the Note, such error would
be harmless because of the testimony of John McKee, a prior attorney of Decedent who prepared the
Note. Tenn. R. App. P. 36(b) (2004). Mr. McKee stated that the Note would only result in interest
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computed on interest if Appellee fell behind in payments. For these reasons, we affirm the trial
court’s admission of Mr. Walker’s testimony concerning the type of interest called for in the Note.
Simple or Compound Interest
Finally, Appellants contend that the trial court erred when it determined that the Note called
for simple, rather than compound, interest. The cardinal rule for interpreting contracts is to ascertain
the intention of the parties and give effect to that intention. Bob Pearsall Motors, Inc. v. Regal
Chrysler-Plymouth, Inc., 521 S.W.2d 578, 580 (Tenn. 1975) (citing Petty v. Sloan, 277 S.W.2d 355
(Tenn. 1955)). Where there is no ambiguity, this Court must attribute the ordinary meaning to the
words used and neither party is to be favored in their construction. Brown v. Tenn. Auto. Ins. Co.,
237 S.W.2d 553, 554 (Tenn. 1951). In other words, this Court’s duty is to enforce contracts
according to their plain terms. Bob Pearsall Motors, 521 S.W.2d at 580 (citing Eleogrammenos v.
Standard Life Ins. Co., 149 S.W.2d 69 (Tenn. 1941)). “The interpretation of a written contract is
a matter of law and not of fact.” Campora v. Ford, 124 S.W.3d 624, 628 (Tenn. Ct. App. 2003)
(citing Rainey v. Stansell, 836 S.W.2d 117 (Tenn. Ct. App. 1992)).
In this case, the only reference the Note makes to interest on interest, which would constitute
compound interest, states “each unpaid installment of principal and interest to bear interest at the rate
of 9 per cent per annum after maturity.” The Note further states that “[s]aid principal and interest
are payable in installments in the following manner, to wit: Six Hundred and No/100 ($600.00)
Dollars on the 1st day of August, 1991, and a like amount on the first day of each month thereafter
until payment in full.” The Note calls for interest on any “unpaid installment” of interest. The Note
defines “installment” as a payment of $600 on the first day of each month beginning on August 1,
1991. After reviewing the Note and the testimony of Mssrs. Walker, Nunan, and McKee, we
conclude the trial court properly found that the interest on the Note is simple interest and that interest
could only accumulate on interest in the event that Appellee failed to pay a monthly “installment”
of $600. Therefore, we affirm the trial court’s conclusion that the amount due on the Note should
be computed using simple, rather than compound, interest. For this reason, we also affirm the
amount due on the Note determined by the trial court.
Conclusion
For the reasons stated above, we affirm the trial court’s determination that the parol evidence
rule did not apply to the testimony. We also affirm the trial court’s decision that the statute of frauds
did not apply to the testimony. Further, we affirm the trial court’s determination that the Dead Man’s
Statute did not apply to the testimony regarding statements made by Decedent except for the
testimony of Appellee, Frank Daniel Murchison, Jr. We affirm the trial court’s finding that Decedent
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successfully made outright gifts to Appellee. We affirm the trial court’s admission of John Walker’s
testimony regarding the type of interest called for in the Note and affirm the trial court’s conclusion
that the amount due on the Note should be calculated using simple interest. Costs of this appeal are
taxed to Appellants, Jan Elizabeth Murchison Rector and Sara Jo Murchison Tucker, and their surety
for which execution may issue if necessary.
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ALAN E. HIGHERS, JUDGE
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