Green Hills Mall TRG, LLC v. BakerSouth, LLC

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 17a0537n.06
Case No. 16-5758
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Sep 22, 2017
DEBORAH S. HUNT, Clerk
GREEN HILLS MALL TRG, LLC, )
) ON APPEAL FROM THE
Plaintiff-Appellee, ) UNITED STATES DISTRICT
) COURT FOR THE MIDDLE
v. ) DISTRICT OF TENNESSEE
)
BAKERSOUTH, LLC ) OPINION
)
Defendant-Appellant. )
BEFORE: MERRITT, COOK, and McKEAGUE, Circuit Judges.
McKEAGUE, Circuit Judge. Defendant BakerSouth, LLC purchased property near a
Nashville-area shopping mall. It then sent a letter to the mall’s owner, plaintiff Green Hills Mall
TRG, LCC, saying that the property came with an easement that let it use the mall’s parking lot.
Green Hills disagreed and sued for a declaratory judgment challenging BakerSouth’s title to the
easement. The district court granted Green Hills’s motion after tracing BakerSouth’s chain of
title and finding that one link—the heirs to a deceased lawyer who had held the mall-adjacent
property as a trustee—lacked authority to sell the easement.
As this appeal was pending, BakerSouth and the beneficiaries of that deceased lawyer’s
trust tried to mend this broken link. First, they had a state probate court appoint a successor
trustee. Then, they had that successor resell the property and easement to BakerSouth. Green
Case No. 16-5758, Green Hills Mall TRG, LLC v. BakerSouth, LLC
Hills responded by moving to dismiss this appeal as moot. For the following reasons, we deny
the motion to dismiss and affirm the district court’s judgment in favor of Green Hills.
I
This case involves two properties: the lots BakerSouth claims to own and the lots Green
Hills owns. In 2013, BakerSouth bought property on which the City of Nashville formerly
operated a public library. BakerSouth maintains that its deed to this property granted it a parking
easement over Green Hills’s nearby parking lot. Currently, Green Hills uses the allegedly
encumbered property for valet parking at its high-end shopping center. BakerSouth’s purported
easement would disrupt those services.
The issue in this case is BakerSouth’s claim to the easement. To evaluate its claim to the
property, and thus the easement, the court must trace its chain of title. In the beginning, a now-
terminated Tennessee corporation called Green Hills Village, Inc.—not to be confused with
plaintiff Green Hills Mall—owned all of the property at issue here. In March 1966, Green Hills
Village transferred the lots claimed by BakerSouth to Harlan Dodson, “as Trustee.” The deed
transferring this property also reserved the disputed parking easement over Green Hills’s lots.
A few months later, trustee Dodson conveyed the lots and easement to the Metropolitan
Government of Nashville, or “Metro” as the parties call it. Metro took the property subject to the
condition that it would only use it to operate a public library. If Metro ever closed the library,
title to the property reverted back to Dodson or “his successors and assigns.”
This reversion complicated matters after Dodson died in 1986 without appointing a
successor. Metro still operated a library on the land, so no one bothered to replace Dodson.
When the library finally closed near 2010, the property interests reverted under the deed but
Dodson’s trusteeship remained empty.
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Case No. 16-5758, Green Hills Mall TRG, LLC v. BakerSouth, LLC
Although Dodson had no successor trustee, he did, however, have three children who
were his legal heirs. These heirs—who everyone agrees did not become trustees—entered the
picture. After the reversion, they transferred some of the library lots and the parking easement to
Thomas White. In 2013, White transferred the lots and the easement to BakerSouth.
Armed with the deed from White, BakerSouth demanded that Green Hills recognize its
right to the easement—that is, to recognize BakerSouth’s purported right to use the mall’s valet
parking for its property’s parking. After some correspondence, Green Hills filed this suit asking
for a declaratory judgment that BakerSouth lacked title to the easement. BakerSouth countered,
asking the court to declare that it owned both the easement and the lots it purchased. Both
parties moved for summary judgment.
The district court granted Green Hills’s motion. It reasoned that the Dodson heirs did
take title to the easement after the reversion—albeit only “bare, naked title.” The court then
held, however, that the heirs could not transfer the easement to White because Tennessee Code
§ 35-15-707(b) required them to present the trust’s property to a state court, which would have to
appoint Dodson’s successor as trustee.
The court only addressed BakerSouth’s right to the easement. It declined to determine
whether BakerSouth owned the underlying lots because it concluded that Green Hills never
contested BakerSouth’s ownership. Thus, the court found no case or controversy to resolve.
BakerSouth now appeals the grant of Green Hills’s motion for summary judgment and the denial
of its own motion.
While this appeal was pending, the beneficiaries of the Dodson trust, with support from
BakerSouth, petitioned the Tennessee probate court to appoint a successor. The probate court
appointed White—the original intermediary in the BakerSouth sale. White then resold the
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Case No. 16-5758, Green Hills Mall TRG, LLC v. BakerSouth, LLC
property and easement to BakerSouth. Touting this new deed, BakerSouth again wrote Green
Hills, demanding that it recognize the easement.
Green Hills continued the fight for its valet parking, however. It moved the probate court
to let it intervene in those proceedings. It also asked that court to set aside its order appointing
White as trustee and to declare the 2016 conveyance from White to BakerSouth void. The court
denied the motion, holding that Green Hills lacked standing to intervene. The Tennessee
Attorney General also appeared in the probate proceedings, and has indicated its plans to assert
that the trust is charitable under Tennessee law. Additionally, after Green Hills refused to
recognize the new deed, BakerSouth filed another lawsuit in state court on May 7, 2017, seeking
to quiet title to the easement based on the new deed. Green Hills, of course, is contesting this
action.
Citing these events in probate court, Green Hills has moved this court to dismiss this
appeal as moot. It argues that BakerSouth has conceded that the district court correctly
determined that it did not own the property because BakerSouth is now participating in a probate
process that accepts the trust’s continued ownership over the property as a premise. Further,
Green Hills notes, BakerSouth has repurchased the property it claims to own in this suit. Thus, it
argues, a case or controversy no longer exists. BakerSouth responds that pursuing its desired
easement through a new avenue does not equate to a concession which renders this appeal moot.
We could, it notes, reverse the district court and enter a judgment saying that BakerSouth has
owned the land free and clear since 2013. If we did that, it seems, Green Hills’s maneuvering in
state court would end.
During argument on this case, the panel suggested the parties attempt to resolve their
differences through mediation. The parties accepted this suggestion and have been in mediation
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Case No. 16-5758, Green Hills Mall TRG, LLC v. BakerSouth, LLC
for the past few months. Although both the parties and the Sixth Circuit’s mediator have worked
diligently to reach a settlement, none has been forthcoming. The mediator therefore returned the
case to the panel for decision. We affirm the district court.
II
We address Green Hills’s motion to dismiss first. Contrary to Green Hills’s arguments,
this appeal is not moot. A case only becomes “moot when the issues presented are no longer
‘live’ or the parties lack a legally cognizable interest in the outcome.” Powell v. McCormack,
395 U.S. 486, 496, 89 S. Ct. 1944, 23 L. Ed. 2d 491 (1969). A case remains “live” when the relief
the parties seek, if granted, would make a difference to their “legal interests.” McPherson v.
Michigan High School Athletic Ass’n, Inc., 119 F.3d 453, 458 (6th Cir.1997) (en banc).
The fight over BakerSouth’s title to the trust’s former property, including the easement
over Green Hills’s parking lot, continues in state court. If this court accepts BakerSouth’s
argument that it received good title in 2013, however, that would end the state-court
controversy—BakerSouth would own the lots and easement. Thus, Green Hills’s challenge to
White’s appointment as successor trustee and its challenge to the 2016 sale to BakerSouth would
themselves become moot. The only action left would be between the trust’s beneficiaries and the
heirs who sold the trust’s property. Indeed, Green Hills’s own actions undercut its argument that
the case is moot—it has continued to litigate the merits of the property ownership here in state
court despite the district court’s judgment. In sum, both parties still have interests at stake.
Rather than a true mootness argument, Green Hills presents more of an estoppel
argument: that BakerSouth’s actions amount to an admission it never held good title. But
BakerSouth’s repurchasing the property does not contradict its ownership claim. BakerSouth
simply hedged its bets. It can maintain that it has owned the land since 2013 without gambling
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everything on this litigation’s outcome. Because the probate proceedings neither render this case
moot nor estop BakerSouth from pursuing relief here, we deny Green Hills’s motion.
III
With that said, we agree with Green Hills on the merits of this specific issue. This case
turns on what happens to trust property under Tennessee law when a trustee dies without a
successor. Both parties agree that the title to real property shifts to a trustee’s heirs. But may a
deceased trustee’s heirs—as BakerSouth contends—sell off the trust’s property? Or do they—as
Green Hills contends—merely serve as conceptual placeholders with limited power to convey
trust property? We find that Tennessee common law—and common sense—demand the latter.
We look to common law because the trust code’s guidance seems ambiguous here. To be
sure, the code explains what should happen to the trusteeship when a trustee dies. If a sole
trustee dies, the trust code provides the same method for replacing him as a trustee who quit or
was fired. See Tenn. Code Ann. § 35-15-704(c). If the trust’s terms provide a successor or
method for appointing a successor, the trust’s terms control. Id. If no terms cover the question,
the qualified beneficiaries can unanimously agree on a successor. Id. But if unanimous
agreement does not—or cannot—happen, a state court will appoint the successor. Id.
Further, the code also says explicitly what should happen with trust property in some
cases. For example, the code says that a “trustee who has resigned or been removed shall, within
a reasonable time, deliver the trust property within the trustee’s possession to the cotrustee,
successor trustee, or other person entitled to it.” Tenn. Code Ann. § 35-15-707(b). Thus, we
know exactly what happens with trust property when a trustee resigns or is removed—that is,
when he quits or gets fired.
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Unlike some states’ trust codes, however, Tennessee’s code never says explicitly what
happens with trust property when a trustee dies. See AMY MORRIS HESS, ET AL., BOGERT’S
TRUSTS AND TRUSTEES § 529, n.14 (observing the Tennessee trust code’s silence on this
question). Thus, we have to determine who takes title to the property. And more importantly for
this case, we have to determine what rights come with title to the property.
Fortunately, we are not the first court to do so. Under the old trust codes, Tennessee
courts faced the same problem. See Williamson v. Wickersham, 43 Tenn. 52, 55 (1866). Like
today, a statute covered how title moved between resigned or removed trustees and their
successors. Id. at 56. Like today, a statute provided a mechanism for replacing a dead trustee
without a successor. Id. And like today, no statute contemplated where title went when a trustee
died without a successor. See id.
When first faced with the issue, the Tennessee Supreme Court reasoned that title needed
some conceptual resting place. See id. (stating that title “could not remain in abeyance”). Thus,
it crafted a rule to deal with the period after a trustee’s death but before a court appointed a
successor. See id. It held that a trustee’s heirs would take “naked legal title” but that the title
would automatically divest when a successor was named. See id. (citing Woolridge et al. vs. The
Planters’ Bank, 1 Sneed 297 (Tenn. 1853)). As a corollary to the rule giving the heirs title, the
court also held that the heirs were necessary parties to any action appointing the successor
trustee—at least when the dead trustee had held an estate with an unlimited duration. See id.
Later, however, the court repudiated its holding that a trustee’s heirs were necessary
parties to an action appointing a successor. See Bransford Realty Co. v. Andrews, 164 S.W.
1175, 1177 (Tenn. 1914). In doing so, the court relied on what it viewed as the limited rights a
trustee’s heirs actually have in the trust property. See id. The court reasoned that heirs had “no
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power respecting the trust estate, nor any interest therein—no rights which they can assert and
which it is necessary to cut off.” Id. In short, they had title in name only. See id.
With the modern trust code similarly silent on the issue, we find that rules in
Wickersham, as modified by Bransford, continue to state Tennessee’s background rule. The
Dodson heirs indeed took title to the trust’s property. But the heirs could act only as conceptual
placeholders—the title would divest automatically upon a successor’s appointment. In the
meantime, the heirs had no power to convey trust property. Thus, we agree with Green Hills that
BakerSouth never received an enforceable easement via Dodson’s heirs in 2013.
BakerSouth resists this reading of Tennessee common law but offers little to persuade us
it is wrong. To start, BakerSouth never addresses Bransford, let alone cites authority displacing
it. Further, BakerSouth’s proposed rule—that a trustee’s heirs take trust property in fee simple
and may freely convey it to third parties—creates troubling results under Tennessee’s trustee-
succession scheme such that we doubt it accurately states the law. Having beneficiaries
unanimously agree on a successor after a trustee dies—or having a court appoint one instead—
takes time. Do settlors and beneficiaries really have to worry about whether their deceased
lawyer’s kids will sell off trust property before this process unfolds? BakerSouth thinks they
must but believes the scheme will work just fine because the beneficiaries can still sue the heirs
for damages. This possible recourse, however, does not adequately explain why Tennessee law
would give a lawyer’s children any transitory right to sell trust property before divestment. At
any rate, as Bransford fortunately shows, BakerSouth’s rule is not Tennessee law.
IV
We DENY Green Hills’s motion to dismiss this case as moot. We AFFIRM the district
court’s judgment that the 2013 conveyance gave BakerSouth no enforceable right to an easement
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over Green Hills’s property. In doing so, however, we express no opinion on the pending
probate proceedings (i.e., whether the successor trustee was properly appointed and properly
reconveyed the easement to BakerSouth). Neither do we express an opinion on BakerSouth’s
action to quiet title to the disputed easement based on the new deed. Those are questions of
Tennessee law that should be resolved by the Tennessee courts.
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