David Pitts v. Floyd Blackwell

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
JULY 9, 2001 Session
DAVID PITTS v. FLOYD R. BLACKWELL, SR.
Direct Appeal from the Probate Court for Franklin County
No Trial Court Number Available; The Honorable Floyd Don Davis, Judge
No. M2000-01733-COA-R3-CV - Filed December 28, 2001
This appeal involves the decision of a probate court to approve the amended first and final
accounting of a conservatorship and award attorney’s fees for the conservator’s defense of the
accounting. The conservator, owner of a funeral home, conducted a $26,367.75 funeral for the
conservatee. An interested party objected to approval of the funeral expenses and a hearing was
held. The probate court ordered the conservator to return the proceeds from a prepaid burial life
insurance policy to the estate, but confirmed the accounting in all other respects. For the following
reasons, we affirm in part, reverse in part, vacate in part and remand for further proceedings.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Probate Court Affirmed in Part,
Reversed in Part, Vacated in Part and Remanded
ALAN E. HIGHERS , J., delivered the opinion of the court, in which DAVID R. FARMER , J., and HOLLY
KIRBY LILLARD , J., joined.
Guy R. Dotson, Sr., Gregory M. Reed, Murfreesboro, TN, for Appellant
Fannie J. Harris, Nashville, TN, for Appellee
OPINION
Facts and Procedural History
Jean Helen West (Ms. West) was an elderly patient at Winchester Health Care Center
suffering from Alzheimer’s type dementia. During much of the time Ms. West was a patient at the
care center, John B. Cunningham (Mr. Cunningham) held a power of attorney, which enabled him
to handle her financial affairs. Mr. Cunningham, however, passed away leaving no one to attend to
Ms. West’s needs.
On May 19, 1998, Floyd R. Blackwell, Sr. (Mr. Blackwell) and Theresa Joan Cunningham
(Ms. Cunningham) petitioned the probate court of Franklin County, Tennessee to be appointed co-
conservators of the person and estate of Ms. West. The probate court granted the petition and
appointed Mr. Blackwell and Ms. Cunningham co-conservators on June 2, 1998. The
conservatorship would last less than eight months, however, due to Ms. West’s death on January 23,
1999. Ms. Cunningham and Mr. Blackwell were both compensated $1,200.00 for their services as
co-conservators.
Mr. Blackwell, at all times relevant to this appeal, owned and operated Johnson-Blackwell
Funeral Home. Mr. Blackwell testified that before he became a co-conservator and before Ms.
West’s death, Mr. Cunningham professed a desire to transfer Ms. West’s prepaid burial insurance
policy from Moore Cortner Funeral Home to Mr. Blackwell’s funeral home.1 The policy, however,
was never transferred by Mr. Cunningham. Instead, after Mr. Cunningham’s death and after Mr.
Blackwell became a co-conservator, Mr. Blackwell and Ms. Cunningham transferred the policy to
Mr. Blackwell’s funeral home.
Upon Ms. West’s death, Ms. Cunningham and Mr. Blackwell approached their attorney to
determine if they had the authority to handle Ms. West’s funeral arrangements. The attorney
indicated that as co-conservators, their authority over the estate extended past Ms. West’s death for
the purpose of arranging her funeral. The decision was made to allow Mr. Blackwell’s funeral home
to arrange the funeral. Mr. Blackwell testified that Ms. Cunningham made all of the decisions
regarding Ms. West’s funeral including the services and products selected. Mr. Blackwell’s
testimony indicates that he merely provided Ms. Cunningham with the catalogs used to select the
casket and vault and played no part in the decision making process.2
The cost of the funeral totaled $26,367.75 and was the most expensive funeral ever
performed by Mr. Blackwell. Other than Ms. West’s, the costliest funeral arranged by Mr. Blackwell
was completed for approximately $12,000. The unusually high costs associated with Ms. West’s
funeral resulted from the purchase of a high-end casket and vault. The casket, costing the estate
$7,227.50, was marked up approximately 300 percent according to the testimony of Mr. Blackwell.
The solid bronze vault, costing the estate $14,100, was marked up approximately 100 percent.
Accordingly, it appears on the purchase and sale of the vault and casket alone, Mr. Blackwell earned
a profit of approximately $12,000. Mr. Blackwell testified that percentage mark-ups on the casket
and vault were the mark-ups he applied to all caskets and vaults. Accordingly, the higher the price
of the items sold, the higher Mr. Blackwell’s profits would be.
1
Under this policy, Ms. West was the insured and Ms. Cunningham was the beneficiary. The policy also listed
a “certificate holder.” Although not abundantly clear from the record, the policy listed a funeral home referred to as
a certificate holder. The certificate holder was apparently to collect on the proceeds from the beneficiary for the funeral
costs. Thus, when discussing the transfer of the policy to M r. Blackw ell’s fun eral hom e, we are ind icating a cha nge in
the listed certificate holder.
2
Ms. Cunningham passed away before the proceedings were held. Accordingly, Ms. Cunningham’s testimony
was una vailab le.
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Ms. West’s funeral was paid for out of Ms. West’s estate as well as by the prepaid burial
insurance policy. Before the funeral, a check totaling $3,000.00 was written by Ms. Cunningham
to Mr. Blackwell’s funeral home. Mr. Blackwell utilized these funds as a down payment on the
casket. The funds from the burial policy, totaling $7,731.93 were also given to Mr. Blackwell. The
amount still owed on the funeral was paid to Mr. Blackwell by check. Mr. Blackwell filled out this
check for $15,527.83 and took it to Ms. Cunningham for her signature. Ms. Cunningham signed the
check and Mr. Blackwell cashed it.
Ms. Cunningham and Mr. Blackwell filed a first and final accounting with the probate court
on March 15, 1999. The accounting listed only the $3000.00 down payment check for funeral
expenses. Mr. Blackwell gave several reasons in his testimony as to why the $15,527.83 check and
the burial policy funds were not listed. First, Mr. Blackwell testified that the check had not
“cleared”the bank when the accounting was written. It appears from the record, however, that the
check had cleared the bank on March 5, 1999, ten days before the accounting was filed. We assume,
most likely, Mr. Blackwell meant that the check had not yet been returned with the following
month’s statement. Mr. Blackwell further testified that although both he and Ms. Cunningham
signed the accounting, Ms. Cunningham had control over the information needed for the accounting
and that she was the one to prepare the accounting.
Ms. Cunningham passed away on March 11, 1999, soon after the first and final accounting
was filed. In August 1999, Mr. Blackwell filed a motion with the probate court to amend the first
and final accounting. The amended first and final accounting contained several alterations to the
original accounting, including the addition of the $15,527.83 check paid to Mr. Blackwell’s funeral
home and the burial policy proceeds.
David Pitts (Mr. Pitts), an interested party, objected to the accounting and a hearing was held
on April 18, 2000. At the hearing, Mr. Blackwell was the only one to testify to the transactions due
to the deaths of other knowledgeable parties. The court requested briefs from all interested parties
before a decision could be made. On June 7, 2000 the court issued an order acknowledging Mr.
Blackwell’s testimony that he declined to act in his capacity as conservator with respect to the
funeral arrangements and never signed any checks. The order required Mr. Blackwell to return the
proceeds from the burial policy to Ms. West’s estate, approved the accounting in all other respects,
and closed the conservatorship. Thus, the probate court approved only $18,635.82 of the $26,367.75
funeral bill. The probate court further ordered that all attorney’s fees resulting from the litigation
be paid by Ms. West’s estate.
Mr. Pitts appeals the probate court’s decision and raises the following three issues for
review:
I. Whether Mr. Blackwell breached his fiduciary duty to Ms. West when he provided funeral
and burial services for her while continuing to maintain his position as co-conservator;
II. Whether the court erred in ordering the fees of Mr. Blackwell’s attorney, Fannie Harris, and
the conservator’s fee of Mr. Blackwell be paid from Ms. West’s estate;
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III. Whether the funeral and burial expenses were reasonable and proper under section 34-11-
113(e) of the Tennessee Code.
Standard of Review
We review this case de novo upon the record with a presumption of correctness of the probate
court’s findings of fact unless the preponderance of the evidence is otherwise. Conclusions of law
are reviewed de novo with no presumption of correctness. TENN. R. APP. P. 13(d).
Law and Analysis
Our review begins with an analysis of Mr. Pitt’s first issue: whether Mr. Blackwell breached
fiduciary duties owed to Ms. West. Pursuant to section 34-11-113 of the Tennessee Code, the
fiduciary duties owed by a conservator “shall not cease at the death of the disabled person, but shall
continue for the sole purpose of making reasonable and proper funeral arrangements for the
disposition of the remains of the disabled per, at death.” Thus, Mr. Blackwell remained a fiduciary
to the estate of Ms. West upon her death with regard to the funeral arrangements, and his actions
should appropriately be analyzed under the constraints demanded by holding such a position.
In Grahl v. Davis, 971 S.W.2d 373 (Tenn. 1998), Justice Drowota provided a thorough
summary of the fiduciary duties surrounding the relationship between conservator and ward, which
we quote:
. . . The purpose of appointing a conservator is "to preserve the estate of an incompetent or
disabled person." Tenn.Code Ann. § 34-4-202 (1991 Repl.). Pursuant to Tenn.Code Ann.
§ 34-4-207 (1991 Repl.), a conservator "shall have the same duties and powers as a guardian
of a minor, and all laws related to the guardianship of a minor shall be applicable to a
conservator." A conservator occupies a fiduciary position of trust of the highest and most
sacred character. See Meloy v. Nashville Trust Co., 177 Tenn. 340, 149 S.W.2d 73 (1941).
The conservator is to manage the conservatee's estate to the best advantage. See Steele v.
Reese, 14 Tenn. (6 Yer.) 263 (1834). The conservator should endeavor to manage the estate
so that if the incompetent person recovers, he or she will find the estate as nearly as possible
in the same condition as he or she left it. See Folts v. Jones, 175 Tenn. 77, 132 S.W.2d 205,
208 (1939). A conservator should not change the character of the conservatee's property
interests unless the change is necessary to protect and promote the interests of the
conservatee. Id. In considering a conservator's request to cash a life insurance policy for the
benefit of the conservatee's estate, this Court, in Folts v. Jones stated:
Before the character of the interest in property held by a [conservatee] can be changed,
it must be made manifest that it is necessary to protect and promote his interest.
Although as a rule, the court will preserve, as far as possible, the interests of the
succession, this rule yields to the paramount rule which makes the [conservatee's]
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welfare the first consideration without regard to the rights of those who may have
eventually rights to succession.
Id.; see also Morris v. Morris, 195 Tenn. 133, 258 S.W.2d 732 (1953).
A conservator is not the alter ego of the conservatee, however, and has no authority to
exercise an elective right or power of the conservatee. Folts, 132 S.W.2d at 207. Therefore,
a conservator has no authority to terminate joint accounts in which the conservatee has an
interest or to change a beneficiary on a life insurance policy. Folts, 132 S.W.2d at 207; see
also Howard v. Imes, 265 Ala. 298, 90 So.2d 818 (1956); In re: Estate of Wright, 430 Mich.
463, 424 N.W.2d 268 (1988); Hendricks v. Grant County Bank, 379 P.2d 693, 697 (Okla.
1963); Matter of Guardinaship of Rich, 520 N.W.2d 63 (S.D. 1994); Rozycke v. Sroka, 3
Ill.App.3d 741, 279 N.E.2d 155 (1972); Matter of Estate of Briley, 16 Kan.App.2d 546, 825
P.2d 1181 (1992); Maess v. Greenfield, 547 S.W.2d 777 (Ky. Ct. App. 1977); Strain v.
Rossman, 47 Or.App. 57, 614 P.2d 102 (1980). Instead, the conservator must petition the
court, and the court, on behalf of the conservatee, can exercise such an election if it is clearly
proven to be in the best interests of the conservatee. Folts v. Jones, 132 S.W.2d at 207; see
also Schlieper v. Rust, 46 Ill.App.3d 319, 4 Ill.Dec. 817, 822, 360 N.E.2d 1192, 1197 (1977);
Rozycke v. Sroka, 279 N.E.2d at 158.
A conservator owes the conservatee an undivided duty of loyalty. 18 Tenn. Juris.,
Mentally III and Other Incompetents, § 8, p. 323 (1984). The conservator cannot be allowed
by law to have any inducement to neglect the interests of the conservatee. Freeman v. Martin,
181 Tenn. 470, 181 S.W.2d 745, 746 (1944). Therefore, it is generally held that a conservator
violates his or her fiduciary duty by acquiring, by purchase or otherwise, the property of the
conservatee. Id.; see also Lanius v. Donnell, 222 Tenn. 58, 432 S.W.2d 659(1968).
Grahl, 971 S.W.2d at 377-78 (footnote omitted).
The Tennessee Supreme Court has also discussed possible conflicts arising from transactions
between a conservator and ward. In Meloy, the court noted the similarity of the fiduciary duties
owed by trustees and conservators and stated that the duties of the conservator are more stringently
applied than to other classes of trusts. Meloy, 149 S.W.2d at 75. The court, borrowing from the case
law of a sister state, further stated, “Nothing in the law of fiduciary trusts is better settled than that
the trustee shall not be allowed to advantage himself in dealings with the trust estate. He shall not
be allowed to serve himself under the pretense of serving his cestui que trust.” Id. (citation omitted)
(emphasis added).
Here, the testimony given by Mr. Blackwell demonstrates the difficulty inherent in any
transaction between conservator and ward:
Q: Now, as conservator of her estate, did you not realize that you were doing business
with yourself?
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A: No, I did not.
Q: You didn’t realize that you as a conservator when you made this transaction you were
going to be doing business with [Floyd] Blackwell, the undertaker?
...
A: Yes.
Q: And under that policy, if you buried her for that amount of money you were going to
make a profit, weren’t you?
A: Yes.
Q: And, so, you actually were going to make money from your conservator – or the
conservatee’s estate?
A: I would be paid by the estate, that’s correct.
Q: But you were also being paid to conserve her estate?
A: That’s correct.
Q: So, on one hand you are paying to take care of it, and on the other hand you were
having her pay you money?
A: Yes.
Throughout Mr. Blackwell’s testimony, he vigorously denies any involvement in the selection
process, which led to the large profit he received from Ms. West’s estate. Mr. Blackwell testified,
however, that he would have received a profit no matter what products were selected. The
significance of this testimony is further exemplified given the fact that Mr. Blackwell played a role
in the decision to have the funeral at his funeral home and in having the prepaid burial policy
arranged for his benefit.
Although Mr. Blackwell’s testimony appears to indicate his removal from the selection
process, as a co-conservator his duties to Ms. West’s estate remained as a matter of law. Without
court involvement either approving the transaction beforehand or removing him from the position
of co-conservator, Mr. Blackwell’s duty to Ms. West’s estate survived any distance he attempted to
place between himself and the selection process. We do not find any indication of fraud or deceit
in the transaction between Mr. Blackwell and Ms. West’s estate, and do not imply that any such
fraud or deceit was found. The finding of fraud or deceit, however, is not necessary for our
conclusion that Mr. Blackwell improperly benefitted from the transaction.
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Mr. Blackwell argues that he has overcome any presumption of a breach of fiduciary duty
because the services provided were necessary, reasonable, and proper and, further, promoted Ms.
West’s best interest. Mr. Blackwell correctly states that there can be no dispute that the funeral
services were necessary and promoted Ms. West’s interest. Mr. Blackwell’s argument, however,
focuses on the services provided by him through his funeral home instead of the transfer of the
prepaid burial policy and the decision for his funeral home to handle the arrangements. As indicated
by the prepaid burial policy, Ms. West had made the decision to have her funeral handled by Moore
Cortner Funeral Home before becoming incompetent. Mr. Blackwell offered no proof that the
switch to his funeral home was necessary, reasonable, or proper in any respects. Although Mr.
Blackwell refers to a desire by a former attorney-in-fact to transfer the policy, the decision was made
by Mr. Blackwell and Ms. Cunningham for Mr. Blackwell’s funeral home to handle the
arrangements.
We also find Mr. Blackwell’s argument that the issue of breach of fiduciary duty is not “ripe”
for review to be without merit. Throughout the hearing in probate court, Mr. Pitts referred to Mr.
Blackwell’s fiduciary duties to Ms. West’s estate. Thus, the issue was litigated even though the final
order of the probate court failed to include the reasoning for its findings. The mere fact that the final
order did not specifically refer to Mr. Blackwell’s fiduciary duties does not preclude this Court from
reviewing the issues addressed by the court.
Thus, under the facts of this case, we hold that Mr. Blackwell, as a matter of law, was not
entitled to earn a profit from the estate of Ms. West. Any profit earned by Mr. Blackwell in
connection with Ms. West’s funeral and burial should not have been approved. Accordingly, with
regard to this issue, the probate court’s approval of the accounting is vacated. We remand this case
for a determination of the reasonable and necessary funeral expenses commensurate with an estate
the size of Ms. West’s. This amount may be approved in the final accounting so long as it does not
exceed the actual expenses incurred by Mr. Blackwell’s funeral home in handling the arrangements.
With regard to the second issue raised by Mr. Pitts, we hold that the probate court erred in
ordering Mr. Blackwell’s attorney’s fees associated with his defense of the amended first and final
accounting be paid by Ms. West’s estate. Because neither this Court nor the parties to this action
find precedent concerning the payment of attorney’s fees in defense of a conservator’s accounting,
we deem it proper to analogize this situation to the defense of an executor’s accounting. When an
accounting prepared by the fiduciary of an estate is challenged on grounds of breach of fiduciary
duty, the fiduciary may collect attorney’s fees only where the accounting is successfully defended
in all respects. In re Estate of Wallace, 829 S.W.2d 696, 704 (Tenn. Ct. App. 1992). “If the
[fiduciary] does not prevail completely, or where it is partially to blame for the bringing about
unnecessary litigation, the [fiduciary] rather than the estate should be responsible for its legal
expenses.” Id. (citations omitted).
Here, Mr. Pitts objected to the accounting raising allegations of breach of fiduciary duty. As
a result of this objection, the probate court ordered Mr. Blackwell to return the proceeds of the
prepaid burial policy to the estate. Thus, because Mr. Blackwell was unsuccessful in completely
defending the accounting, his attorney’s fees should not be paid for by Ms. West’s estate.
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With regard to the conservator’s fee paid to Mr. Blackwell, however, we affirm the decision
of the probate court. It is apparent from the record that Mr. Blackwell provided services to the estate
other than through his involvement with Ms. West’s funeral and burial. Thus, we find no error in
the probate court’s award of compensation for those services.
Because we vacate the probate court’s order confirming the accounting and remand for a
determination of the reasonable and necessary funeral expenses not to exceed the actual expenses
incurred by Mr. Blackwell’s funeral home, we fail to reach Mr. Pitts’ third issue.
Conclusion
For the foregoing reasons, the decision of the lower court is affirmed in part, reversed in part,
vacated in part, and remanded for further proceedings consistent with this opinion. Costs of this
appeal are taxed equally against the Appellant, Mr. Pitts, and his surety, and the Appellee, Mr.
Blackwell, for which execution may issue if necessary.
___________________________________
ALAN E. HIGHERS, JUDGE
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