Branum v. Akins

COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE FILED
April 28, 1998
BARBARA BRANUM, ) C/A NO. 03A01-9709-CH-00418
) Cecil Crowson, Jr.
Plaintiff-Appellant, ) Appellate C ourt Clerk
)
)
v. ) APPEAL AS OF RIGHT FROM THE
) HAMILTON COUNTY CHANCERY COURT
)
)
)
CORRINE W. AKINS and )
MELVIN L. AKINS, )
) HONORABLE R. VANN OWENS,
Defendants-Appellees. ) CHANCELLOR

For Appellant For Appellee Corrine W. Akins

JOHN C. CAVETT, JR. R. DEE HOBBS
Cavett & Abbott, PLLC Bell, Turner & Hobbs
Chattanooga, Tennessee Chattanooga, Tennessee

For Appellee Melvin L. Akins

ROBERT G. NORRED, JR.
Spears, Moore, Rebman &
Williams
Chattanooga, Tennessee

O P I N IO N

AFFIRMED IN PART
REVERSED IN PART
REMANDED Susano, J.

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 In this case, we are called upon to determine whether a

trustee’s past conduct conformed to her fiduciary duty.

This litigation arose out of a conveyance of real

property that had been held in trust for the benefit of the

plaintiff, Barbara Branum (“Branum”). The trustee, Corrine W.

Akins (“Mrs. Akins”), who is also Branum’s mother, conveyed the

subject property to Branum’s brother, Melvin L. Akins (“Larry

Akins”). Branum filed suit, alleging that Mrs. Akins had

breached her fiduciary duty as trustee and that the conveyance of

the trust property constituted a fraudulent transfer. Following

a bench trial, the court dismissed Branum’s complaint. Branum

appealed, raising the following two issues for our consideration:

1. Did the trial court apply the correct
standard to the actions of the trustee and
the recipient of the trust property?

2. Should the transfer of trust property be
set aside?

I.

In 1961, Mrs. Akins and her husband executed a deed

conveying the subject property, consisting of a lot and duplex,

to Mrs. Akins as trustee for Branum. The trust gives the trustee

the power to sell, convey, transfer or encumber the subject

property. From 1961 to 1993, the duplex was rented to various

tenants, and all income generated from the property was deposited

in a joint bank account held in the names of Branum and Mrs.

Akins. From time to time, Branum requested and was given various

amounts of money by Mrs. Akins from this joint account.

2
 In 1993, Mrs. Akins agreed to mortgage the trust

property in order to enable Branum to borrow $30,000 from AmSouth

Bank. On prior occasions, Branum had requested that she be

allowed to use the property as collateral, but Mrs. Akins had

refused. On this occasion, however, Branum stated that she

needed the money to pay off her children’s school loans, and Mrs.

Akins relented. While Mrs. Akins was required to sign the deed

of trust, there is nothing in the record to indicate that she was

required to sign the promissory note to AmSouth.

In 1995, Branum and her husband began experiencing

financial difficulties. She fell behind in her payments on the

AmSouth loan. According to Steve Taylor, an AmSouth vice

president who testified at trial, the loan had approximately 147

days of interest due as of late July, 1995. Taylor also

testified that by the time a loan becomes 90 days past due,

AmSouth generally starts its consideration of foreclosure. The

record also reflects that Mrs. Akins had been monitoring the

status of the loan, but that Branum had cut off her mother’s

access to such information in June, 1995.

On approximately July 25, 1995, Mrs. Akins conveyed the

trust property to Branum’s brother, Larry Akins. At that time,

AmSouth had not yet commenced foreclosure proceedings on the

property; nevertheless, Mrs. Akins testified as follows:

I was about to lose the property. I couldn’t
get a loan. I was desperate. I had to do
something, and I had to do it in a hurry.

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Mrs. Akins first offered to sell the property to her other

daughter, Jeannette Walker, but she was not interested. Mrs.

Akins then offered it to her son. According to a real estate

appraiser who testified at trial, the property was worth $64,000

as of July, 1995. Larry Akins testified that he was aware of the

property’s value; however, he stated that he only reluctantly

agreed to purchase it from his mother. Mrs. Akins agreed to

transfer the property to her son in return for his commitment to

pay off his sister’s loan. Branum was unaware of the transfer.

To fund his purchase of the property, Larry Akins

borrowed some $41,600 from a bank. He gave that bank a deed of

trust on the property. A portion of the proceeds from the new

loan were paid to AmSouth to satisfy Branum’s loan, which at that

time amounted to $29,392.25. Other than being relieved of this

obligation, Branum received nothing from the transfer; nor did

she receive any further income from the property.

In September, 1995, Branum learned for the first time

of the conveyance of the trust property. Shortly thereafter, she

filed this action against her mother and brother, alleging that

Mrs. Akins had breached her duty as trustee and that Larry Akins

had fraudulently obtained title to the property. In her

complaint, Branum requested, among other things, that she be

awarded a judgment for all proceeds generated by the trust

property from 1961 to the present, plus interest; that the

conveyance be set aside; and that she be awarded punitive damages

of $150,000 against the defendants. Following a bench trial, the

trial court found as follows:

4
 ...the Court is of the opinion that the
trustee had to exercise reasonable diligence
and try to preserve the property, and if [it]
had to be sold to try and obtain a reasonable
price.

* * *

[Mrs. Akins is] elderly, only an eighth grade
education. She’s not very sophisticated.
And the Court believes that she probably had
an unjustified fear of mortgaging the
property or loaning the property. But the
Court cannot say or believe that such was bad
faith in any way on her part to have such a
fear.

The trial court reasoned from this lack of bad faith that Mrs.

Akins had not breached her duty as trustee. It also found that

Larry Akins had not violated any legal duty to Branum. The trial

court therefore dismissed Branum’s complaint in its entirety, and

this appeal followed.

Branum argues that the trial court applied the

incorrect standard to Mrs. Akins’ actions, and that it erred in

failing to set aside the transfer of the trust property.1 Mrs.

Akins defends the decision of the trial court, arguing that

because she acted honestly and, according to her, with ordinary

prudence under the circumstances, she is not subject to liability

for any errors in judgment. She further contends that Branum

should not be heard to complain regarding the transfer, because

Branum insisted that the property be mortgaged, misrepresented

the purpose of the loan, failed to make the loan payments as they

came due, and concealed the status of the loan. Larry Akins

1
In her brief, Branum contends that the transfer of the trust property
was in part precipitated by Larry Akins’ alleged desire to satisfy debts owed
to him by Branum’s husband. We find the record to be devoid of any evidence
to support this theory.

5
echoes these arguments, insisting that his mother was reasonably

concerned about losing the trust property, and that the evidence

does not support a cause of action against him.2

II.

Our review of this non-jury case 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. Rule 13(d), T.R.A.P. We must honor this presumption

unless we find that the evidence preponderates against the trial

court’s findings. Id.; Union Carbide Corp. v. Huddleston, 854

S.W.2d 87, 91 (Tenn. 1993); Old Farm Bakery, Inc. v. Maxwell

Assoc., 872 S.W.2d 682, 684 (Tenn.App. 1993). The trial court’s

conclusions of law, however, are not afforded the same deference.

Campbell v. Florida Steel Corp., 919 S.W.2d 26, 35 (Tenn. 1996);

Presley v. Bennett, 860 S.W.2d 857, 859 (Tenn. 1993).

III.

Given that they are closely related, we will address

Branum’s two issues together.

2
In his brief, Larry Akins also states that the trial court’s decision
can be sustained on two alternate theories not addressed in its memorandum
opinion. Specifically, he suggests that the subject trust was a Totten trust,
and that Branum is estopped from recovery by virtue of her own actions. His
brief does not develop these theories or contain any authority to support this
position, as required by Rule 27(a), T.R.A.P. Where a party makes no legal
argument and cites no authority in support of a position, such issue is deemed
waived and will not be considered on appeal. See Wilhite v. Brownsville
Concrete Co., 798 S.W.2d 772, 775 (Tenn.App. 1990); State ex rel. Dep’t of
Transp. v. Harvey, 680 S.W.2d 792, 795 (Tenn.App. 1984).

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 Generally speaking, a trustee is under a duty to act in

good faith, with due diligence, and with at least such care and

skill as a person of ordinary prudence would exercise in dealing

with his or her own property. Knox County v. Fourth & First

Nat’l Bank, 182 S.W.2d 980, 984 (Tenn. 1944); Gibson County v.

Fourth & First Nat’l Bank, 96 S.W.2d 184, 192 (Tenn.App. 1936).

A breach of trust occurs when the trustee violates any duty that

he or she owes to the beneficiary of the trust. Id. The general

rule is that “a trustee is not liable for mere errors of

judgment, when acting honestly with ordinary prudence within the

limits of the trust.” Id.

In her brief, Mrs. Akins cites the case of Alexander v.

Nelson, 825 S.W.2d 106 (Tenn.App. 1991), for two propositions,

i.e., (1) that trustees are not always required to receive fair

market value for the property they sell, and (2) that each case

must be considered in light of its own circumstances. Id. at

108. While we agree that Alexander so holds, we would point out

that in the Alexander case, this Court went on to hold that the

trial court had properly set aside the trustee’s sale of trust

property for less than half of its value, despite the fact the

trustee in that case had been vested with broad discretion to

sell the property “[f]or such price and upon such terms as he

thinks best.” Id. at 107, 108-09.

In the instant case, the record contains no proof that

Mrs. Akins acted less than honestly in transferring the trust

property to her son. However, we cannot say that she satisfied

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the other aspect of her obligation as trustee, i.e., to act with

“ordinary prudence.” Gibson County, 96 S.W.2d at 194. Although

Branum was delinquent in her loan payments and foreclosure was

certainly a real possibility, there is no evidence that

foreclosure proceedings had been instituted or that Mrs. Akins

was under any specific deadline by which she had to sell the

property. There is also no evidence to indicate that Mrs. Akins

made any effort, prior to the conveyance, to ascertain the fair

market value of the property; nor did she make any investigation

regarding potential buyers outside the family. It is clear that

Mrs. Akins had a strong desire to keep the subject property in

the family; however, this desire is not a sufficient legal basis

to justify transferring this trust property to her son for an

amount far less than its fair market value.

As indicated earlier, the proof shows that the subject

property was worth approximately $64,000, substantially more than

the benefit received by Branum as a result of the sale. In fact,

the only benefit that Branum received out of the transfer to her

brother was the payment of her outstanding indebtedness on the

AmSouth loan -- some $29,000 plus. By this conveyance, the

trustee deprived her daughter/beneficiary of the remaining equity

in the property, as well as any future income it might generate.3

Under these circumstances, we find that the evidence

preponderates against the trial court’s finding that Mrs. Akins

satisfied her obligations as trustee for Branum’s benefit. While

Mrs. Akins may have acted in good faith, as found by the trial

3
The record indicates that rentals of the property over the years in
question had produced income of approximately $63,000.

8
court, good faith is not the only criteria by which a trustee’s

actions are measured. In this instance, we find that Mrs. Akins

did not act with “ordinary prudence” when she transferred the

property to her son for an amount well below its fair market

value.

We do not fault Mrs. Akins’ decision to pursue a sale

of the subject property. With foreclosure a distinct

possibility, Mrs. Akins acted reasonably when she decided to sell

the property; however, she did not act reasonably in the way she

went about the sale. We find and hold that Mrs. Akins’ failure

to first ascertain the fair market value of the subject property,

coupled with her apparent insistence on selling the property to a

family member, constitute conduct at variance with such care and

skill as a person of ordinary prudence would exercise in dealing

with his or her own property. See Knox County, 182 S.W.2d at

984; see also Gibson County, 96 S.W.2d at 192. It is clear that

Mrs. Akins did what she considered appropriate in order to keep

the property “in the family”; but her obligation as trustee was

not to maintain the ownership of this property in her immediate

family. Her obligation was to act in the best interest of the

beneficiary of the trust. We cannot say that she did so in this

case. The standard to which Mrs. Akins had to conform is an

objective one. Therefore, the trial court’s finding, in effect,

that Mrs. Akins thought she was doing the “right thing” begs the

question. The real issue is what a person acting with “ordinary

prudence” would have done. While such a hypothetical person

might well have determined that a sale of the property was in the

best interest of the beneficiary, we find that such a person

9
would have done more to ensure that she received fair

consideration for the property. When Mrs. Akins’ conduct is

measured by this objective standard, it is found lacking.

From a review of Branum’s brief, it appears that she

does not seriously challenge the trial court’s dismissal of her

claim of fraud or conspiracy on the part of Larry Akins. In any

event, we find, as did the trial court, that the evidence does

not support such a claim.

Rule 36(a), T.R.A.P., mandates that we “grant the

relief on the law and facts to which the party is entitled or the

proceeding otherwise requires...”; see also Thornburg v. Chase,

606 S.W.2d 672, 675 (Tenn.App. 1980). However, given the record

before us, we are not in a position to determine the damages

and/or other appropriate remedy to which Branum might be

entitled. Accordingly, we remand this matter to the trial court

to fashion an appropriate judgment under the pleadings,

consistent with this opinion, for Mrs. Akins’ breach of trust.

We affirm so much of the trial court’s judgment as dismisses the

plaintiff’s claim for fraud. The remainder of the judgment is

reversed. Costs on appeal are taxed to the appellee Mrs. Akins.

__________________________
Charles D. Susano, Jr., J.

CONCUR:

_________________________
Houston M. Goddard, P.J.

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_________________________
William H. Inman, Sr.J.

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