Tennessee Business Litigation Lawyers Blog

Tennessee Court Finds Fraudulent Conveyance Between Husband and Wife

Published on: November 25, 2013 | by J. Ross Pepper

Collecting a judgment or debt owed from either a husband or wife, but not owed by them jointly, can be difficult, if not impossible. Why so? Jointly owned property, in many circumstances, is not subject to a creditor’s claim against just one of the spouses. Some spouses try to avoid paying debts by transferring property they own individually to the other spouse so that both spouses own the property jointly. When this occurs, it is possible, depending on the facts, that a Tennessee court might declare the transfer to be a fraudulent conveyance (also referred to as a “fraudulent transfer”).

If a transfer is found to be a fraudulent conveyance, a Tennessee court has a range of options to assist a wronged creditor. It might negate the transfer so that the property reverts to the spouse with the debt so that his or her creditors can collect against it. Or, it might order the property sold to satisfy the claim of a creditor. In some circumstances, a court might even enter a money judgment in favor of a creditor and against the spouse which received the fraudulent conveyance.

In a recent fraudulent conveyance case, the Court of Appeals of Tennessee ruled that the transfer of a 27 acre farm by one spouse to the other was a fraudulent conveyance. Here are the facts:

Commercial General Liability Insurance Policies v. Errors and Omissions Policies

Published on: November 18, 2013 | by J. Ross Pepper

The Court of Appeals of Tennessee, in a case involving the litigation of a commercial general liability policy (“CGL policy”), issued an opinion that is helpful for those trying to understand the coverage parameters of commercial general liability policies. Commercial general liability policies are perhaps the most prevalent and common type of policies carried by businesses, but they provide markedly different coverage and protection than do errors and omissions policies (“E & O” policies).

The case involved a financial advisor who had advised some clients to invest in promissory notes. The promissory notes became worthless. The investors sued the estate of the financial advisor (who had passed away by the time the lawsuit was filed). The investment advisor’s business had been covered by a commercial general liability policy issued by Nationwide.

The personal representative of the estate of the investment advisor made a claim against the Nationwide CGL policy. As frequently happens in insurance policy litigation, Nationwide filed a declaratory judgment action in Chancery Court. Nationwide argued that it had no duty to defend the estate of the investment advisor or to provide any coverage for the claimed losses.

In Undue Influence Case, Tennessee Court Holds Marriage Does Not Necessarily Establish Confidential Relationship

Published on: November 11, 2013 | by J. Ross Pepper

In a case with potentially significant ramifications for other undue influence cases, the Court of Appeals of Tennessee ruled that, just because the Wife and Husband were married (for 17 years, no less), that fact did not establish a confidential relationship. Establishing a confidential relationship in undue influence cases is absolutely critical. A transaction, transfer, will, or payable on death designation, etc. can only be set aside based on the legal cause of action of undue influence if there was a confidential relationship between the giver and receiver. Thus, no confidential relationship = no chance of winning on an undue influence claim. (It is not necessary to prove a confidential relationship to set aside a will or transaction if the giver lacked the mental capacity to understand what he or she was doing).

While it is necessary, in an undue influence case, to prove a confidential relationship, once it is proven, a huge advantage is gained by the party seeking to set aside the will, transaction, or beneficiary designation: A legal presumption arises that the receiving party did use undue influence to obtain the benefit which he or she obtained. In such a case, the defendant (who received the benefit) can expect a judge in a Tennessee court to instruct the jury that the transaction is presumed to have been the result of undue influence unless the defendant proves otherwise by clear and convincing evidence.

In Tennessee, a variety of relationships can give rise to a confidential relationship. There are virtually no bright-line rules about what facts do or do not establish a confidential relationship. Tennessee courts have broadly segregated confidential relationships into two categories: (1) legal relationships; and (2) family and other relationships. The most prevalent type of legal confidential relationship arises when a party holds a power of attorney, but such a relationship could arise in other contexts.

Jury Verdict In Favor of Pepper Client in Undue Influence and Breach of Trust Case

Published on: July 22, 2013 | by J. Ross Pepper

On July 18, 2013, a jury in Davidson County, Tennessee returned a verdict for a client of the firm who was represented by attorney J. Ross Pepper. The firm’s client was the defendant (“Defendant”) in an undue influence case. The plaintiff (“Plaintiff”) in the case also alleged that the Defendant had breached his fiduciary duties, committed the tort of conversion with respect to certain funds and bank accounts, and exercised undue influence with respect to beneficiary designations made on his sister’s pension, life insurance policies, and IRA.

The case involved the sister (“Sister”) of the Defendant who passed away in September of 2011. The deceased Sister’s niece, the Plaintiff, alleged that the Defendant had used undue influence to procure an amendment to the Sister’s revocable living trust that made him the exclusive beneficiary of the trust. The Plaintiff also alleged that the Defendant should be held liable for breach of fiduciary duty because he made imprudent investments, and used monies of Sister’s trust for purely personal expenses.

The proof at trial showed that Sister had started the living trust in 2004; amended it in 2006 to provide for a more substantial distribution to her brother, Defendant; amended it in 2009 to reduce her brother’s distribution to the same as it was under the 2004 trust; and, then, amended it again for the last time, about 19 months before her death, to make her brother, the Defendant, the sole beneficiary of the trust (except for certain minor specific bequests totaling about $15,000.00). At Sister’s death, the trust assets were worth close to 1 million dollars.

Uniform Commercial Code: Warranties Under Tennessee Law

Published on: June 21, 2013 | by J. Ross Pepper

If you do business in Nashville, or anywhere else in Tennessee, you might be wise to know something about the warranty provisions of the Uniform Commercial Code (“UCC”). Those warranty provisions are contained in Chapter Two of the UCC, which deals with sales.

When do the warranty provisions of the UCC apply to a sale? They apply only to transactions for the sale of goods. “Goods” are defined, generally, as anything that is movable. What warranties does the UCC create? There are three UCC warranties which potentially could apply to any sale of goods in Tennessee.

EXPRESS WARRANTIES

Why Contracts Must Have Definite Terms

Published on: June 9, 2013 | by J. Ross Pepper

In what should have been an easy win in a breach of contract case, a Tennessee bank went home with a goose egg after the Court of Appeals applied a fundamental rule of Tennessee contract law to the facts of the bank’s case. The case, which was filed in Coffee County, Tennessee, answers the question of why the material terms of contracts should be definite: Because, if they are not definite, the contract will not be enforceable.

The facts of the case are as follows:

• The Bank loaned money to the Defendants

Partitioning Real Estate and Land in Tennessee by Lawsuit: Does the Court Divide It, or Sell It?

Published on: April 30, 2013 | by J. Ross Pepper

In Nashville, as well as all other Tennessee cities and counties, there is plenty of land— commercial, residential, rural, and urban— that is owned by more than one person as tenants in common, also sometimes referred to as “co-tenants.” There can be two tenants in common or more, to a single piece of real estate.

The fundamental distinction of tenants in common is that each has an undivided interest, equal to their ownership share, in the entire piece of real estate. So, if there are two tenants in common, each has an undivided one-half interest in the entire property. Thus, both have the right to use all of the property and to share in the profits made from it, if any. Joint ownership of this nature, not surprisingly, frequently results in conflicts and problems. And, frequently, those conflicts and problems cause one, or more, of the co-tenants to seek the help of a Tennessee court by filing a partition lawsuit.

In Tennessee, the right of a co-tenant to have real estate partitioned is absolute. Tennessee law follows the rule that, if you do not want to continue to have to own property with another co-tenant or co-tenants, you don’t have to do so. If you file a partition action, a Tennessee court must partition the real estate. A Tennessee court cannot deny you your right to get out of your tenancy in common.

Statutes of Limitations Applicable to Mutual Will Cases in Tennessee

Published on: April 11, 2013 | by J. Ross Pepper

The Supreme Court of Tennessee has issued an opinion clarifying which statutes of limitations are applicable to cases involving the breach of a contract to make mutual wills. If you are involved in a mutual will case, and are worried that your case might be barred by the statute of limitations which is applicable to claims against an estate, T.C.A. §30-2-307, your worries might be over.

In the case at hand, a married couple, both of whom were previously married, and both of whom had children by a previous marriage, signed a contract to make mutual wills. The same day that they signed the contract to make mutual wills, they executed wills. In the contract to make mutual wills, the husband and wife agreed that, when the first of them died, the survivor would not change his or her will.

The wills which the couple executed provided that each would receive a life estate in the real property they owned together or jointly and that, after both had passed away, the real property which they owned jointly or together, as of the time the wills were made, would pass in equal shares to the four children of both of them. (Husband had three children and wife had one, a son).

Evidentiary Issues in Undue Influence and Will Contest Cases

Published on: April 5, 2013 | by J. Ross Pepper

The Supreme Court of Tennessee has recently issued an opinion in an undue influence and will contest case which speaks to what type of evidence a party can use, at trial, to attempt to set aside a will based on undue influence. In will contest cases, undue influence cases, breach of contract cases, and just about every other kind of case, clients are often surprised about what type of evidence cannot be used at trial to help prove their cases. In analyzing any case, an experienced trial lawyer knows that he or she must consider, not only what facts help prove his or her client’s case, but also, which of those facts might not be admissible at trial.

In trials, only relevant evidence is admissible. What makes evidence relevant? The test for determining relevance, in many instances, becomes very, very subjective. Here is the test under Tennessee law: Does the evidence have any tendency to make the existence of any fact that is of consequence to the determination of the case more probable or less probable than it would be without the evidence? If so, it is relevant.

In the case at hand, In Re Estate of Smallman, the Supreme Court of Tennessee reversed a jury verdict because it determined that the trial court had let the jury hear evidence which was not relevant. What was the offending evidence?

Recovering Future Commissions in Tennessee

Published on: March 28, 2013 | by J. Ross Pepper

For salespeople, brokers, and agents who derive a substantial part, if not all, of their income from commissions, knowing something about Tennessee law on the subject of future commissions is worthwhile. By future commissions, I am referring, broadly, to commissions that become due after an account is established, but while the relationship between the organization that originally agreed to pay the commission and the salesperson, broker or agent is intact. I am also referring to commissions which accrue after the salesperson, broker or agent has terminated their relationship with the organization that agreed to pay commissions.

The best way for a salesperson, broker or agent in Tennessee to avoid the headaches, uncertainty and expense of a breach of contract lawsuit to recover future commissions is to make sure that there is a clear, written agreement which outlines specifically the circumstances under which future commissions are owed. In the absence of any written agreement which clearly sets forth the agreement of the parties as to future commissions, parties involved in cases about future commissions are likely to become embroiled in a legal slugfest about what was agreed to between the parties and who said what.

I have seen many employment agreements which make it crystal clear that, once the employer terminates the employee, or once the employment relationship is terminated for whatever reason, the employer will owe no future commissions even from accounts or business generated by the terminated employee. These types of provisions are enforceable. Agreements between organizations agreeing to pay commissions and independent contractors, or other non-employees, often contain similar provisions which restrict the right to future commissions once the relationship is terminated.

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