IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
November 25, 2014 Session
MELISSA L. TAYLOR ET AL. v. JAMES T. GEORGE, II, ET AL.
Appeal from the Chancery Court for Knox County
No. 175472-1 John F. Weaver, Chancellor
No. E2014-00608-COA-R3-CV-MARCH 16, 2015
The plaintiff filed this action seeking to enforce a judgment for child support and alimony
entered in South Carolina and subsequently domesticated in Tennessee. One defendant
serves as the trustee of a testamentary trust while the other defendant is a trust beneficiary
and the judgment debtor. Before this action proceeded to trial, the trustee distributed all of
the respective trust assets to the beneficiary/debtor. As the trial court determined that there
was insufficient evidence of a fraudulent conveyance or civil conspiracy, it dismissed the
plaintiff’s claims against the trustee. The trial court upheld the plaintiff’s judgment against
the beneficiary/debtor and awarded pre- and post-judgment interest thereon. The plaintiff
appealed. Discerning no error, we affirm the trial court’s judgment.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Affirmed; Case Remanded
T HOMAS R. F RIERSON, II, J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and J OHN W. M CC LARTY, JJ., joined.
Jonathan Swann Taylor and Courtney R. Houpt, Knoxville, Tennessee, for the appellant,
Melissa L. Taylor.
James T. George, II, Knoxville, Tennessee, Pro Se.
Theodore Kern, Knoxville, Tennessee, for the appellee, Tessa G. Dunn.
OPINION
I. Factual and Procedural Background
The plaintiff, Melissa L. Taylor, was formerly married to the defendant, James T.
George, II. Two children were born of the marriage, Alexa and Arianna, both of whom are
now adults. Ms. Taylor and Mr. George divorced in 2002 in South Carolina. As part of their
divorce proceedings, Ms. Taylor and Mr. George entered into a Final Order of Separate
Maintenance and Support, wherein Mr. George agreed that he owed Ms. Taylor $80,000 in
unpaid spousal and child support.
Following entry of the divorce, Ms. Taylor relocated with the children to Knoxville.
Mr. George subsequently moved to Knoxville as well. In February 2004, Ms. Taylor sought
to register the South Carolina Final Order in Knox County, Tennessee. Acting on her
petition, the Knox County Circuit Court entered an order finding that the Final Order of
Separate Maintenance and Support was entitled to full faith and credit in Tennessee. Mr.
George did not, however, pay any amount towards satisfaction of the $80,000 judgment.
In 2007, Mr. George’s mother, Gloria George, died in Maryland. Her will provided
that separate trusts would be established for Alexa and Arianna to be funded with $50,000
each. The will further provided:
a. If my son is then living, and if he has an obligation to make any
payment to his former wife, Melissa L. George, pursuant to the Final
Order of Separate Maintenance and Support dated November 27, 2001
and the Property and Separation Agreement dated November 27, 2001,
and if Melissa L. George shall execute a receipt and release
acknowledging satisfaction of said obligation in part (in the case of my
son’s older living child) or in whole (in the case of my son’s younger
living child), then:
(1) Upon such child attaining age eighteen (18), my Trustee
shall distribute Forty Thousand Dollars ($40,000) from
such child’s trust to Melissa L. George for the express
purpose of providing for such child’s college,
professional, and/or post-graduate education.
(2) With respect to the balance of such child’s trust, my
Trustee may expend such amounts of the net income, and
to the extent the net income is insufficient then of the
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principal, of the trust as is necessary or appropriate, in
my Trustee’s sole and absolute discretion, for the college,
professional, and/or post-graduate education of such
child.
The will also provided for a trust fund benefitting Mr. George. Mr. George’s sister, Tessa
Dunn, was named in the testamentary instrument as personal representative and trustee of the
trusts. The will also provided that Ms. Dunn, as trustee, could expend for Mr. George’s
benefit “such amounts of the net income, and to the extent the net income is insufficient then
of the principal, of the trust as is necessary or appropriate, in my Trustee’s sole and absolute
discretion.” Further, Ms. Dunn was directed by the will to make all trust payments directly
to the respective beneficiaries.
While Ms. Taylor engaged in numerous discussions with Mr. George regarding the
provisions of the will, Ms. Taylor was eventually told that the will’s provisions tied payment
of Ms. Taylor’s judgment to her children’s college trust funds. Ms. Taylor vehemently
objected to the use of the college trust funds to satisfy her judgment against Mr. George. At
some point during these discussions, Ms. Taylor offered to settle the judgment against Mr.
George for $70,000, which offer Mr. George accepted. In return, Mr. George asked Ms.
Taylor to execute a release of the $80,000 judgment, which she did. However, when Mr.
George delivered the payment of $70,000 to Ms. Taylor’s husband, attorney Dudley Taylor,
Ms. Taylor learned that the checks had been written by Ms. Dunn from Alexa’s and
Arianna’s respective college trust funds. When Ms. Taylor asked Mr. George to tender the
release in exchange for return of the checks, Mr. George did not respond.
Ms. Taylor subsequently filed the instant declaratory judgment action on June 30,
2009, requesting that the trial court declare the rights and liabilities of the parties regarding
this matter. Mr. George and Ms. Dunn were named as defendants.1 For relief sought, Ms.
Taylor requested that the parties’ $70,000 settlement be set aside. Ms. Taylor further
petitioned the court to direct Ms. Dunn, as trustee of Mr. George’s trust, to pay the $80,000
judgment from his trust funds. Ms. Taylor also sought a finding by the court that Ms. Dunn
had violated her fiduciary duties as trustee of the college trust funds for Alexa and Arianna.
Ms. Taylor initially deposited the checks written on her children’s trust funds into an escrow
account. Following the filing of the instant action, she deposited those funds into the registry
of the court.
1
Ms. Taylor initially filed this action on behalf of Alexa and Arianna as well as in her individual
capacity. Alexa and Arianna became adults during the pendency of the action, and they agreed that their
claims against Ms. Dunn were satisfied when the “settlement” funds were restored to their respective college
trust funds. Accordingly, Alexa’s and Arianna’s claims against Ms. Dunn were dismissed.
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Ms. Dunn filed a motion to dismiss, asserting that the trial court lacked personal
jurisdiction over her because of her North Carolina residence. Mr. George similarly filed a
motion to dismiss, contending that Ms. Taylor’s complaint failed to state a claim upon which
relief could be granted. Upon consideration, the trial court denied both motions. Ms. Taylor
amended her complaint to include a claim of civil conspiracy, alleging that Mr. George and
Ms. Dunn conspired to defraud Ms. Taylor’s children by disbursing their college trust fund
monies to satisfy the judgment owed by Mr. George. On August 31, 2012, the parties entered
into an agreed order allowing the funds being held by the court to be released to Ms. Dunn
as trustee so that the monies could be restored to the college trust funds of Alexa and
Arianna.
Ms. Taylor subsequently sought a second amendment to her complaint, presenting a
claim that, despite their knowledge of Ms. Taylor’s $80,000 judgment against Mr. George,
Ms. Dunn and Mr. George had disclosed that all the funds in Mr. George’s trust were
depleted. In furtherance of the claim, Ms. Taylor alleged that Ms. Dunn had conspired with
Mr. George and inappropriately disbursed money to him in order to defeat Ms. Taylor’s claim
to those funds.
A trial on the merits was conducted in this matter over the course of four days: March
4, March 5, April 15, and July 24, 2013. At the conclusion of trial, Ms. Taylor filed a motion
seeking to amend the pleadings to conform to the evidence and asserting that the parties had
tried the issue of enforceability of the $70,000 settlement by express or implied consent. Ms.
Taylor thus sought to enforce this settlement as an alternative remedy.
Having taken the case under advisement, the trial court issued a memorandum opinion
on February 28, 2014, elucidating extensive findings regarding the issues presented. In its
memorandum opinion, the trial court, inter alia, found that the South Carolina court had
entered a Final Order establishing a judgment against Mr. George for unpaid support totaling
$80,000 and that the Fourth Circuit Court had domesticated and adopted the Final Order of
the South Carolina court in Tennessee. In its order, the Fourth Circuit Court had granted a
sixty-day stay of enforcement based on Mr. George’s representations that he wished to attack
the validity of the underlying order. In the instant action, the trial court noted that this sixty-
day period had long since expired. The court also found that the evidence established the
defendants’ recognition of the $80,000 judgment and that the judgment represented unpaid
child and spousal support.
Regarding other issues joined, the trial court determined that Mr. George and Ms.
Dunn attempted to use the children’s trust funds to satisfy the judgment against Mr. George.
As the court found, Ms. Taylor and Mr. George had entered into a settlement agreement
whereby Ms. Taylor agreed to accept the reduced amount of $70,000; however, she had made
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it clear that she would not accept payment from the children’s funds to satisfy this obligation.
According to Ms. Taylor, any payment would have to be derived from Mr. George’s trust
funds.
With reference to the payment made, the court specifically found that while Mr.
George had tendered the checks, it was later discovered that these checks were drawn on the
children’s trusts. Consequently, Ms. Taylor thereafter deposited the funds with the court and
sought to invalidate the settlement. Ms. Taylor’s attorney later proffered that his client
wanted the original settlement to be recognized but with the funds to be paid out of Mr.
George’s trust. In support, Ms. Taylor filed a motion seeking to amend the pleadings to
conform to the evidence at trial. The court acknowledged that while Mr. George requested
in his answer that the settlement be enforced, Ms. Dunn sought through her answer a
dismissal of the claim for invalidation of the settlement. However, the court determined that
Ms. Taylor’s children had attained the age of majority and were not pursuing claims to
invalidate the settlement because the funds had been restored to their trusts. By reason of the
action’s procedural posture, the court thus observed that “plaintiff and defendants have come
full circle.”
Relative to the claims against Ms. Dunn, the trial court found that she had participated
with Mr. George to shield his trust funds from the payment of his $80,000 spousal and child
support obligation and judgment. Moreover, the court noted that Ms. Dunn was aware of the
judgment from the inception of the administration of her mother’s estate because her
mother’s will specifically addressed it.
In further support of its adjudication of issues presented, the court found that on July
24, 2008, Ms. Taylor sent Ms. Dunn a letter, inquiring as to the children’s interests in Ms.
George’s estate. Mr. George initially informed Ms. Taylor that although he was not an estate
beneficiary, the children were. Mr. George later told Ms. Taylor that his unpaid judgment
would be paid from his inheritance. Meanwhile, Ms. Dunn wrote to Ms. Taylor on
September 4, 2008, enclosing a purported copy of a page from Ms. George’s will pertaining
to the children, but the page proved false. The court determined that the actual will
conditioned the trustee’s payment of a child’s trust funds to Ms. Taylor upon Ms. Taylor’s
execution of a “receipt and release acknowledging satisfaction of said obligation.” Absent
execution of the release, as the court concluded, Ms. Dunn maintained no authority to use the
children’s funds in connection with the satisfaction of Mr. George’s unpaid obligation.
According to the trial court, while Ms. Taylor was a judgment creditor, Ms. Dunn and
Mr. George sought to conceal Mr. George’s interest in his trust to prevent Ms. Taylor from
reaching the trust funds to satisfy the judgment. The court concluded that Ms. Dunn had
conspired with Mr. George to this effect. As the court determined, at the time Ms. Dunn was
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served with the complaint, she was holding no less than $85,833 in trust for Mr. George.
During the next year, Ms. Dunn made accelerated disbursements to Mr. George, depleting
his entire interest in the trust. As found by the court, Ms. Dunn’s trusteeship had served no
purpose other than to hinder creditors from reaching Mr. George’s interest in his trust. The
court also found that Ms. Dunn afforded Mr. George control over his trust funds inasmuch
as she provided him blank signed checks for use. She also deposited $35,000 into his
account without knowledge of his intentions concerning the money.
Relative to the issue of personal jurisdiction, the trial court concluded that Ms. Dunn
had submitted herself to the jurisdiction of this court by conspiring with Mr. George to keep
his trust funds from Ms. Taylor and dissipating trust assets by sending his payments to
Tennessee. The court also concluded, however, that the evidence did not sustain a fraudulent
conveyance action because all transfers were made to Mr. George with no evidence
indicating improper or extraordinary use of the funds by him.
In addition, the trial court found that although Ms. Taylor could have either filed a suit
in aid of a judgment or a bill in discovery, she had failed to do so. Instead, the trust funds
at issue were held outside the state of Tennessee with no lien or garnishment placed against
them. Therefore, the court determined that Ms. Taylor’s filing suit in Tennessee did not
serve to freeze the assets held in the out-of-state trust. While monies were disbursed to Mr.
George in a manner providing him control of the funds, his use of the funds was not shown
to have been for any improper or extraordinary purpose.
The trial court ultimately concluded that Ms. Taylor was entitled to a declaratory
judgment establishing that Mr. George owed her $80,000. The court further ruled that Ms.
Taylor could institute an appropriate action to enforce said judgment. In determining that the
original agreement between the parties provided that the unpaid support obligation was to
be without interest, the court explained that Ms. Taylor was entitled to an award of
prejudgment interest only from the date of the filing of her complaint.
The trial court dismissed any claim concerning the $70,000 settlement by determining
that Ms. Taylor had no entitlement to the children’s trust funds and that any claims based on
same had been settled by the children. Moreover, the court dismissed all claims against Ms.
Dunn. The trial court granted Ms. Taylor a final judgment against Mr. George in the amount
of $80,000 plus pre- and post- judgment interest. Upon motion filed pursuant to Tennessee
Rule of Civil Procedure 59, the trial court subsequently entered an order amending its final
judgment to clarify that Ms. Taylor’s motion to amend the pleadings to conform to the
evidence was denied. Ms. Taylor timely appealed.
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II. Issues Presented
Ms. Taylor presents the following issues for our review, which we have restated
slightly:
1. Whether the trial court erred in failing to hold Ms. Dunn personally
liable for payment of Ms. Taylor’s judgment against Mr. George by
reason of her collaboration with Mr. George to dissipate all of the funds
in his trust.
2. Whether the trial court erred in its denial of Ms. Taylor’s motion to
amend the pleadings to conform to the evidence.
3. If the trial court erred in denying the motion to amend, whether there
was an enforceable settlement agreement such that Ms. Dunn should be
held personally liable as a result of dissipating the funds rather than
satisfying the settlement agreement.
Mr. George presents the following additional issue:
4. Whether the trial court erred in the assessment of $40,000 in interest on
the judgment.
III. Standard of Review
In this non-jury case, our review is de novo upon the record of the proceedings below;
however, that record comes to us with a presumption that the trial court’s factual findings are
correct. Tenn. R. App. P. 13(d). We must honor this presumption unless we find that the
evidence preponderates against the trial court’s findings. Union Carbide Corp. v.
Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). We review questions of law, including those
of statutory construction, de novo with no presumption of correctness. Tenn. R. App. P.
13(d); Estate of French v. Stratford House, 333 S.W.3d 546, 554 (Tenn. 2011). When
interpreting statutes, “[o]ur primary objective is to carry out legislative intent without
broadening or restricting the statute beyond its intended scope.” Estate of French, 333
S.W.3d at 554 (citing Houghton v. Aramark Educ. Res., Inc., 90 S.W.3d 676, 678 (Tenn.
2002)).
As our Supreme Court has further instructed regarding statutory construction:
[T]here are a number of principles of statutory construction, among which is
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the most basic rule of statutory construction: “‘to ascertain and give effect to
the intention and purpose of the legislature.’” Gleaves v. Checker Cab Transit
Corp., Inc., 15 S.W.3d 799, 802 (Tenn. 2000) (quoting Carson Creek Vacation
Resorts, Inc. v. State Dep’t. of Revenue, 865 S.W.2d 1, 2 (Tenn. 1993)).
However, the court must ascertain the intent “without unduly restricting or
expanding the statute’s coverage beyond its intended scope.” State v. Sliger,
846 S.W.2d 262, 263 (Tenn. 1993). See also Gleaves, 15 S.W.3d at 802;
Worley v. Weigels, Inc., 919 S.W.2d 589, 593 (Tenn. 1996); Owens v. State,
908 S.W.2d 923, 926 (Tenn. 1995). “The legislative intent and purpose are to
be ascertained primarily from the natural and ordinary meaning of the statutory
language, without a forced or subtle interpretation that would limit or extend
the statute’s application.” State v. Blackstock, 19 S.W.3d 200, 210 (Tenn.
2000) (citing State v. Pettus, 986 S.W.2d 540, 544 (Tenn. 1999)).
Courts are not authorized “to alter or amend a statute.” Gleaves, 15 S.W.3d
at 803. The reasonableness of a statute may not be questioned by a court, and
a court may not substitute its own policy judgments for those of the legislature.
Id. (citing BellSouth Telecomm., Inc. v. Greer, 972 S.W.2d 663, 673 (Tenn. Ct.
App. 1997)). “[C]ourts must ‘presume that the legislature says in a statute
what it means and means in a statute what it says there.’” Id. (quoting
BellSouth Telecomm., Inc., 972 S.W.2d at 673).
Mooney v. Sneed, 30 S.W.3d 304, 306-07 (Tenn. 2000).
IV. Ms. Dunn’s Personal Liability
Ms. Taylor contends that the trial court erred in failing to hold Ms. Dunn personally
liable in this matter because, according to Ms. Taylor, Ms. Dunn conspired and collaborated
with Mr. George to deplete his trust fund in order to prevent Ms. Taylor from collecting her
judgment. Ms. Taylor’s claim is based on two separate theories: (1) that Mr. George, acting
in concert with Ms. Dunn, fraudulently conveyed away his trust assets to thwart Ms. Taylor’s
ability to collect thereon as a judgment creditor and (2) that Mr. George and Ms. Dunn
conspired to defraud Ms. Taylor and prevent her from collecting her judgment against funds
maintained in Mr. George’s trust.
A. Fraudulent Conveyance
By amended complaint, Ms. Taylor asserted a claim pursuant to the Uniform
Fraudulent Transfer Act, codified at Tennessee Code Annotated § 66-3-301, et seq. Ms.
Taylor claimed that Mr. George and Ms. Dunn worked together to convey and deplete his
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trust assets so that Ms. Taylor would be unable to collect her judgment against his trust
funds. The pertinent section of the Act provides:
(a) A transfer made or obligation incurred by a debtor is fraudulent as to
a creditor, whether the creditor’s claim arose before or after the transfer
was made or the obligation was incurred, if the debtor made the transfer
or incurred the obligation:
(1) With actual intent to hinder, delay, or defraud any
creditor of the debtor; . . . .
Tenn. Code Ann. § 66-3-305. Ms. Taylor posits that because the trial court found that Ms.
Dunn gave Mr. George control of the trust and assisted him in transferring and depleting the
trust assets before Ms. Taylor could enforce her judgment, those transfers should be deemed
to be fraudulent pursuant to this statutory provision.
The trial court found no violation of the Uniform Fraudulent Transfer Act, however,
because the transfers were made to Mr. George and not by Mr. George. We agree with the
trial court on this issue. The statute specifically references “transfer[s] made . . . by a debtor”
and contains no provision for transfers made to a debtor by a trustee. The Act defines a
debtor as “a person who is liable on a claim.” See Tenn. Code Ann. § 66-3-302 (6). Ms.
Dunn was not the debtor herein as she maintained no liability to Ms. Taylor. Instead, she
was simply trustee of Mr. George’s trust, making disbursements to him from the trust
pursuant to the authority granted to her by Ms. George’s last will and testament.
Ms. Taylor contends that the Act provides authority for extending its application to
Ms. Dunn because the definition of a “transfer” includes “every mode, direct or indirect,
absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or
an interest in an asset, . . . .” See Tenn. Code Ann. § 66-3-302 (12) (emphasis added). Ms.
Taylor argues that because Ms. Dunn allowed Mr. George to exert control over the assets in
his trust, the funds were indirectly transferred by him in concert with Ms. Dunn. Ms. Taylor
provides no authority for such an interpretation of the statute, however, and this Court has
likewise located none. As previously stated, “[t]he legislative intent and purpose are to be
ascertained primarily from the natural and ordinary meaning of the statutory language,
without a forced or subtle interpretation that would limit or extend the statute’s application.”
See Mooney, 30 S.W.3d at 306 (quoting State v. Blackstock, 19 S.W.3d 200, 210 (Tenn.
2000)). We determine that the statute clearly and unambiguously provides that only transfers
made by a debtor may be found to be fraudulently conveyed. In this matter, the assets were
transferred by Ms. Dunn, as trustee, to the debtor, Mr. George. Such action does not invoke
application of the statutory provisions of Tennessee Code Annotated § 66-3-305. We
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therefore conclude that the trial court properly found that there was no evidence of a
fraudulent conveyance in the instant case.
B. Conspiracy to Defraud
Ms. Taylor also claims that Ms. Dunn and Mr. George entered into a conspiracy to
defraud her by their actions resulting in the dissipation of Mr. George’s trust assets so that
Ms. Taylor would be unable to collect her judgment against the trust. Ms. Taylor contends
that such a conspiracy claim requires a “combination of two or more persons who, each
having the intent and knowledge of the other’s intent, accomplish by concert an unlawful
purpose, or accomplish a lawful purpose by unlawful means, which results in damage to the
plaintiff,” citing Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 703 (Tenn. 2002).
On this issue, the trial court determined that as Ms. Taylor had not filed a lien or any other
action serving to “freeze” the assets of the out-of-state trust, Ms. Dunn had done nothing
unlawful by making transfers to Mr. George of his trust assets. Thus, the court impliedly
found that there was no underlying tort or wrongful act.
As this Court has previously elucidated regarding conspiracy to defraud:
As defined in Dale v. Thomas H. Temple Co., 186 Tenn. 69, 208 S.W.2d 344
(Tenn. 1948), “[a] ‘conspiracy to defraud’ on the part of two or more persons
means a common purpose, supported by a concerted action to defraud, that
each has the intent to do it, and that it is common to each of them, and that
each has the understanding that the other has that purpose.” 208 S.W.2d at
353-354. Having determined that plaintiff’s actual knowledge precludes her
recovery for fraud, we hold that the plaintiff may not recover for conspiracy
to defraud when fraud cannot be established.
As stated in 15A C.J.S. Conspiracy, § 9:
A mere conspiracy to commit a fraud is never of itself a cause
of action; it must be proved that there was a conspiracy to
defraud and a participation in the fraudulent purpose, either in
the scheme or in its execution, which worked injury as a
proximate consequence. It is the civil wrong resulting in
damage and not the conspiracy which constitutes the cause of
action for conspiracy to defraud.
Pusser v. Gordon, 684 S.W.2d 639, 642 (Tenn. Ct. App. 1984); see also Brown v. Birman
Managed Care, Inc., 42 S.W.3d 62, 67 (Tenn. 2001) (recognizing that a conspiracy to
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defraud claim requires underlying demonstration of fraud); Stanfill v. Hardney, No. M2004-
02768-COA-R3-CV, 2007 WL 2827498 at *7 (Tenn. Ct. App. Sept. 27, 2007) (holding that
a conspiracy claim requires showing of commission of tortious or wrongful act).
In the case at bar, the evidence supported the trial court’s finding that Ms. Dunn and
Mr. George did act in concert and conspire to deplete Mr. George’s trust assets so that Ms.
Taylor would be unable to collect her judgment against the trust. As the trial court also
properly found, however, there was no proof of an underlying tortious or wrongful act that
would support Ms. Taylor’s conspiracy claim. The will provided Ms. Dunn, as trustee,
discretion to make disbursements of Mr. George’s trust fund assets. Even though Ms. Dunn
was aware of Ms. Taylor’s unpaid judgment, Ms. Dunn was not violating a court order or lien
or otherwise acting in a fraudulent or tortious manner by disbursing trust fund assets to Mr.
George. By transferring funds to Mr. George, Ms. Dunn initiated actions that she was
lawfully entitled to take as trustee. The fact that Ms. Dunn’s actions resulted in depletion of
the trust assets before Ms. Taylor could enforce her judgment against the trust does not
render Ms. Dunn’s actions fraudulent or tortious. See, e.g., Burton v. Hardwood Pallets, Inc.,
No. E2001-00547-COA-R3-CV, 2001 WL 1589162 at *5 (Tenn. Ct. App. Apr. 29, 2002)
(holding that there was no fraudulent conduct where a defendant creditor’s lawful actions to
collect a debt resulted in an unsecured creditor’s debt going unsatisfied). Therefore, without
the demonstration of the commission of a tortious or wrongful act by Ms. Dunn, there can
be no cognizable claim of civil conspiracy. We determine that the trial court properly
dismissed Ms. Taylor’s claims against Ms. Dunn in this matter.
V. Motion to Amend Pleadings
Ms. Taylor’s principal brief on appeal contends that the trial court erred in failing to
grant her motion to amend the pleadings to conform to the evidence so as to allow her to
pursue a claim that the alleged $70,000 settlement between the parties should be enforced.
Ms. Taylor asserts that the claim regarding enforceability of the settlement agreement was
tried by the express or implied consent of the parties. In her reply brief, however, Ms. Taylor
purports to abandon this issue. Moreover, following a thorough review of the transcript in
this case, we agree with the trial court’s determination that Ms. Taylor’s counsel represented
at trial that Ms. Taylor would not pursue this claim and further that the defendants did not
consent to try this claim.
At the outset of the hearing in the matter, the trial court conducted a lengthy on-the-
record discussion with the parties’ attorneys regarding the claims that would be tried. Ms.
Taylor’s counsel was questioned at great length regarding whether Ms. Taylor sought to
assert any claim based on the purported $70,000 settlement agreement or whether she was
seeking to enforce the $80,000 judgment for unpaid child and spousal support. Ms. Taylor’s
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counsel repeatedly represented that Ms. Taylor was not seeking to enforce the settlement
agreement. Although the facts surrounding the settlement negotiations and the history of the
parties’ positions were delved into at trial, it is abundantly clear that Ms. Taylor consistently
sought to enforce her $80,000 judgment against Mr. George and Ms. Dunn rather than
seeking to enforce the $70,000 settlement. While Ms. Taylor’s counsel maintained that the
$80,000 judgment was the basis of Ms. Taylor’s claim, the trial advanced accordingly. As
such, the parties did not expressly or impliedly try the issue of the enforceability of the
$70,000 settlement. The trial court properly denied Ms. Taylor’s motion seeking to amend
the pleadings to assert this claim. As Ms. Taylor’s issue regarding the $70,000 settlement
was waived by her counsel at trial and abandoned on appeal, it is now moot.
VI. Interest on the Judgment
In determining that Ms. Taylor maintained an enforceable judgment against Mr.
George for $80,000 in unpaid child and spousal support, which was not subject to
modification, the trial court specifically stated:
However, under the separation and settlement agreement, the obligation was
without interest. Therefore, the plaintiff Taylor is entitled to pre-judgment
interest only from the date of the filing of her complaint. Also, the obligation
of $80,000 is not apportioned between child support and spousal support.
Consequently, interest will not be allowed at the higher rate for child support
but at the rate of 10% per annum for prejudgment interest and at the rate
provided by Tenn. Code Ann. § 47-14-121 for post judgment interest.
The underlying order of the South Carolina court provides:
The parties entered into a Consent Pendente Lite Order and Order Sealing
Record dated August 2, 2000. The Consent Order provided in part that the
HUSBAND would pay the WIFE $5000 a month in unallocated support,
commencing August 1, 2000. The HUSBAND has not made any pendente lite
unallocated support payments to the WIFE. Accordingly, there is an arrearage
in the amount of $80,000. The parties agree that the HUSBAND owes the
WIFE $80,000 in unpaid unallocated support payments. The HUSBAND
agrees to enter into a confession of judgment which shall be held by the
WIFE’s attorney in escrow pending a possible reconciliation between the
parties. The $80,000 shall not accrue interest. In the event that the attempt at
reconciliation is unsuccessful, or upon a future separation of the parties after
a successful reconciliation, the WIFE may instruct her attorney in writing of
the unsuccessful reconciliation attempt or physical separation of the parties
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and the WIFE’s attorney may record the confession of judgment. Both parties
agree that the $80,000 represents unpaid and unallocated support owed to the
WIFE by the HUSBAND and that said $80,000 shall be nondischargeable in
any future bankruptcy by the HUSBAND as it represents unpaid spousal and
child support.
Mr. George contends that the trial court’s assessment of interest on the $80,000 judgment
was erroneous due to the language in the above provision stating that the “$80,000 shall not
accrue interest.” Although it is unclear whether the intent of the parties’ agreement was that
interest not accrue during the period of attempted reconciliation or at any time following,
such language is not dispositive of this issue. The parties’ agreement was incorporated into
a judgment entered by the South Carolina court, which was later recognized and
domesticated as an enforceable judgment in the Tennessee court.
Tennessee Code Annotated § 47-14-123 provides that prejudgment interest “may be
awarded by courts or juries in accordance with the principles of equity at any rate not in
excess of a maximum effective rate of ten percent (10%) per annum . . . .” Our Supreme
Court has explained:
An award of prejudgment interest is within the sound discretion of the trial
court and the decision will not be disturbed by an appellate court unless the
record reveals a manifest and palpable abuse of discretion. This standard of
review clearly vests the trial court with considerable deference in the
prejudgment interest decision. Generally stated, the abuse of discretion
standard does not authorize an appellate court to merely substitute its judgment
for that of the trial court. Thus, in cases where the evidence supports the trial
court’s decision, no abuse of discretion is found.
Several principles guide trial courts in exercising their discretion to award or
deny prejudgment interest. Foremost are the principles of equity. Tenn. Code
Ann. § 47-14-123. Simply stated, the court must decide whether the award of
prejudgment interest is fair, given the particular circumstances of the case. In
reaching an equitable decision, a court must keep in mind that the purpose of
awarding the interest is to fully compensate a plaintiff for the loss of the use
of funds to which he or she was legally entitled, not to penalize a defendant for
wrongdoing.
Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998) (internal citations omitted). As
this Court further recognized regarding prejudgment interest:
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Parties who have been wrongfully deprived of money have been damaged in
two ways. First, they have been damaged because they have not received the
money to which they are entitled. Second, they have been damaged because
they have been deprived of the use of that money from the time they should
have received it until the date of judgment. Awards of pre-judgment interest
are intended to address the second type of damage. They are based on the
recognition that a party is damaged by being forced to forego the use of its
money over time.
***
As we construe the Myint decision, the Tennessee Supreme Court has shifted
the balance to favor awarding prejudgment interest whenever doing so will
more fully compensate plaintiffs for the loss of use of their funds. Fairness
will, in almost all cases, require that a successful plaintiff be fully
compensated by the defendant for all losses caused by the defendant, including
the loss of use of money the plaintiff should have received. That is not to say
that trial courts must grant prejudgment interest in absolutely every case.
Prejudgment interest may at times be inappropriate such as (1) when the party
seeking prejudgment interest has been so inexcusably dilatory in pursuing a
claim that consideration of a claim based on loss of use of the money would
have little weight, (2) when the party seeking prejudgment interest has
unreasonably delayed the proceedings after suit was filed, or (3) when the
party seeking prejudgment interest has already been otherwise compensated
for the lost time value of its money.
Scholz v. S.B. Int’l, Inc., 40 S.W.3d 78, 82 (Tenn. Ct. App. 2000) (internal citations omitted).
Having fully reviewed the evidence and considered the equities in this matter, we
determine that the trial court did not abuse its discretion by awarding Ms. Taylor prejudgment
interest. As our Supreme Court has explained, “[a] court abuses its discretion when it causes
an injustice to the party challenging the decision by (1) applying an incorrect legal standard,
(2) reaching an illogical or unreasonable decision, or (3) basing its decision on a clearly
erroneous assessment of the evidence.” Lee Med., Inc. v. Beecher, 312 S.W.3d 515, 524
(Tenn. 2010). Ms. Taylor received an $80,000 judgment against Mr. George in South
Carolina in 2002. She subsequently petitioned for that judgment to be domesticated in
Tennessee through the Knox County Fourth Circuit Court. As Ms. Taylor later filed the
instant action seeking to enforce that judgment, the judgment was ultimately upheld. Ms.
Taylor has experienced thirteen years with no receipt of payment toward this judgment.
There is no proof that she has been dilatory in pursuing the judgment or has otherwise
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delayed the proceedings. The trial court did not err in awarding Ms. Taylor prejudgment
interest commencing the date of the filing of her complaint.
With reference to post-judgment interest, in Tennessee such an award is mandatory.
See Watson v. Watson, 309 S.W.3d 483, 501 (Tenn. Ct. App. 2009). Tennessee Code
Annotated § 47-14-122 provides that “[i]nterest shall be computed on every judgment from
the day on which the jury or the court, sitting without a jury, returned the verdict without
regard to a motion for new trial.” As our Supreme Court has elucidated:
A party’s right to post-judgment interest is based on its entitlement to the use
of proceeds of a judgment. The purpose of post-judgment interest is to
compensate a successful plaintiff for being deprived of the compensation for
its loss between the time of the entry of the judgment awarding the
compensation until the payment of the judgment by the defendants.
Accordingly, a party who enjoys the use of funds that should have been paid
over to another party should pay interest on the retained funds.
The right to post-judgment interest is statutory. . . . This statute [i.e., § 47-14-
122] is mandatory and trial courts are not free to ignore it. The failure of a
trial court’s judgment or decree to specify post-judgment interest does not
abrogate the obligation imposed by the statute.
State v. Thompson, 197 S.W.3d 685, 693 (Tenn. 2006) (quoting Varnadoe v. McGhee, 149
S.W.3d 644, 649 (Tenn. Ct. App. 2004)). Ergo, the trial court in this matter did not err in
awarding Ms. Taylor post-judgment interest on the judgment. We affirm the trial court’s
award of both pre- and post-judgment interest in this case.
VII. Conclusion
For the reasons stated above, we affirm the trial court’s judgment in all respects.
Exercising our discretion, we assess costs on appeal equally to the appellant, Melissa L.
Taylor, and the appellee, James T. George, II. See Tenn. R. App. P. 40; see, e.g., City of
Knoxville v. Brown, 260 S.W.2d 264, 268 (Tenn. 1953). This case is remanded to the trial
court, pursuant to applicable law, for collection of costs assessed below.
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THOMAS R. FRIERSON, II, JUDGE
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