John Wolfe v. First American Corp.

IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
JOHN J. WOLFE, )
)
Plaintiff/Appellant, ) Madison Law NO. C-94-088
)
vs. )
)
FIRST AMERICAN CORPORATION, d/b/a ) Appeal No. 02A01-9510-CV-00212
FIRST AMERICAN TRUST COMPANY OF )
JACKSON, TENNESSEE )
Defendant/Appellee.
)
)
FILED
June 20, 1997
Cecil Crowson, Jr.
Appellate C ourt Clerk
APPEAL FROM THE CIRCUIT COURT OF MADISON COUNTY
AT JACKSON, TENNESSEE
THE HONORABLE WHIT S. LAFON, JUDGE
For the Plaintiff/Appellant: For the Defendant/Appellee:
Carl I. Jacobson William C. Bell, Jr.
Memphis, Tennessee Jackson, Tennessee
AFFIRMED
HOLLY KIRBY LILLARD, JUDGE
CONCUR:
ALAN E. HIGHERS, J.
DAVID R. FARMER, J.
OPINION
In this case, the plaintiff asserted that the defendant trust company distributed trust funds in
violation of the conditions set forth in the trust instrument. The trial court found no trust violation,
and we affirm.
Aqua Yacht Harbor Marina Limited Partnership (“Aqua Yacht”) planned to locate a marina
in Tishomingo County, Mississippi, and lease yacht slips. however, Aqua Yacht did not yet own
the land on which the marina was to be situated. It sought to enter into agreements to lease the yacht
slips prior to acquiring the land. To safeguard the monies received for the leases prior to Aqua
Yacht’s acquisition of the land, Aqua Yacht entered into a Trust Agreement (“Trust”) with Appellee
First American Trust Company of Jackson, Tennessee (“FATC”). The Trust provided that lessee
funds received for the lease of slips would be placed in trust and would be distributed only upon the
following conditions:
A. To Lessor [Aqua Yacht], when Lessor delivers to Trustee [FATC] a certified
copy of a Warranty Deed showing title to certain real property in Tishomingo
County, Mississippi (“Real Property”) whereby Lessor shall have sufficient power
in accordance with applicable law to deliver Leases to Lessees, on or before June 2,
1994, and when Lessor delivers to Trustee a fully executed Lease in the format of the
“Lease” attached hereto as Exhibit “B”, or
B. To each Lessee, from whom Lessor received a contribution, if a certified copy
of a Warranty Deed for the Real Property is not delivered to the Trustee on or before
June 2, 1994, and a fully executed Lease Agreement in the form of the “Lease”
attached hereto as Exhibit “B” is not delivered to the Trustee before June 2, 1994 .
Thus, the Trust stated that lessee funds were to be distributed to Aqua Yacht when Aqua Yacht
delivered to FATC a warranty deed for the real property. Aqua Yacht offered long-term, ninety-
nine-year leases to prospective lessees. The lease contracts provided that the leases would not
become binding as long-term leases until the Trust provisions had been complied with. The
provisions of the Contract for Lease included the following:
3. This Closing is effective as of this date, with the following contingencies:
(a) As of the date hereof, Lessor [Aqua Yacht] has a right of possession coupled
with an option to purchase the property on which the Slip lies, such option
exercisable by Lessor at any time on or prior to June 1, 1994. Consequently, the
Lease Agreement shall not be effective as a long-term lease until the requirements
of paragraph 4(b) (1) below are met.
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4. (a) Upon execution of the Lease and payment of the sum set forth in
paragraph 2 above, the Net Lease Price . . . shall be placed with the Aqua Yacht
Harbor Marina Limited Partnership in an interest bearing trust account at First
American National Bank of Jackson, Tennessee, subject to the terms and conditions
of a Trust Agreement with said Trust Company. . . .
(b) The Funds . . . shall not be released from trust until the first to occur of the
following events:
(1) Lessor exercises the option referred to in paragraph 3(a)
above, in which event he shall deliver to Trustee a fully executed
Lease Agreement identifying the Slip leased by Lessee and specified
herein, in the format of the “Lease” which is attached as Exhibit 1 to
the Offering Plan issued by Lessor; or
(2) June 2, 1994 arrives without exercise of the option (paragraph
3(a)) and the Lease, as described in the preceding paragraph, is
therefore not delivered by Lessor to Trustee.
Thus, the lease contracts provided that they became binding as long-term leases only if Aqua Yacht
delivered to FATC the executed leases and a warranty deed for the real property on which the marina
was located on or before June 1, 1994. FATC would then distribute the trust funds to Aqua Yacht.
On May 1, 1990, Appellant John Wolfe (“Wolfe”) signed a lease and lease contract with
Aqua Yacht, agreeing to pay $100,000 for a ninety-nine-year lease on a slip. On the same day,
Wolfe also signed a Guaranteed Right of Resale with Aqua Yacht. This document gave Wolfe the
option to require Aqua Yacht to buy back the yacht slip under certain conditions, on or before
January 10, 1994. Although the Guaranteed Right of Resale referred specifically to the Trust, it was
not referenced in the Trust, the Contract for Lease, or the Lease. Therefore, FATC was not a party
to any agreement that referenced Wolfe’s Guaranteed Right of Resale.
In sum, the contracts involved are:
1. The Trust (between Aqua Yacht and FATC) - Prior to Aqua Yacht acquiring the land on
which the marina was situated, monies from the lease of yacht slips were placed in trust. When
Aqua Yacht delivered to FATC a warranty deed for the land, demonstrating it had authority to
provide long term leases, FATC could then release to Aqua Yacht the lease monies held in trust.
2. Lease Contract (between Aqua Yacht and Wolfe) - Prior to Aqua Yacht acquiring the land
on which the marina was situated, the lease for the boat slip would not be long-term and the lease
monies would be placed in trust under the Trust. If Aqua Yacht delivered to FATC the executed
boat slip leases and a warranty deed for the land, the leases would become long-term and FATC
would deliver the trust monies to Aqua Yacht. FATC was not a party to the Lease Agreements but
had knowledge of them.
3. Guaranteed Right of Resale (between Wolfe and Aqua Yacht) - This Agreement gave
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Wolfe the option to require Aqua Yacht to buy back the boat slip lease under certain conditions.
FATC was not a party to this agreement and had no knowledge of it.
In September 1990, Aqua Yacht sent to FATC a letter and affidavit, with attachments,
purporting to meet the Trust requirements for the distribution of the trust funds to Aqua Yacht. The
attachments to the affidavit included a Memorandum and Limited Power of Attorney between Aqua
Yacht and the owner of the land on which the marina was located. This document gave Aqua Yacht
the power to offer legally valid, ninety-nine-year leases to the slip lessees. It was not a warranty
deed, as stated in the Trust. FATC sought legal advice on whether these documents satisfied the
Trust requirements for the release of trust funds. FATC’s legal counsel gave FATC a verbal opinion
that the Memorandum and Limited Power of Attorney was the functional equivalent of a warranty
deed and gave Aqua Yacht sufficient power to deliver legally binding, ninety-nine-year leases to
lessees of the boat slips. Consequently, FATC released the trust funds to Aqua Yacht.
In December 1993, Wolfe sent Aqua Yacht a letter notifying Aqua Yacht that he wished to
exercise his option to sell back his slip, under the Guaranteed Right of Resale. Wolfe learned that
Aqua Yacht had sold the marina, and the new owner of the marina refused to honor the resale
agreement. Wolfe then sought from FATC a reimbursement of his $100,000 investment and found
that the funds had already been distributed to Aqua Yacht. Wolfe sued FATC for violating the Trust.
FATC filed a motion for summary judgment, which was granted by the trial court. The trial
court concluded that the Memorandum and Limited Power of Attorney “was the legal and functional
equivalent of a warranty deed under Mississippi law,” and that the “intent and purpose of the Trust
were satisfied” by the Memorandum and Limited Power of Attorney. The trial court reasoned that
FATC should not be the guarantor of a contract of which it had no knowledge. It noted that
exculpatory clauses in the Trust protected FATC from liability, and that Wolfe had not been
disturbed in his use of the slip, had not attempted to sell the slip, and had suffered no legally
cognizable damages.
On appeal, Wolfe claims that FATC is liable to him, as a beneficiary of the Trust, for
distributing the trust funds in violation of the express and unambiguous conditions of the Trust. In
the alternative, he maintains that the Memorandum and Limited Power of Attorney received by
FATC was not the functional equivalent of a warranty deed.
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A motion for summary judgment should be granted when the movant demonstrates that there
are no genuine issues of material fact and that the moving party is entitled to a judgment as a matter
of law. Tenn. R. Civ. P. 56.03. The party moving for summary judgment bears the burden of
demonstrating that no genuine issue of material fact exists. Byrd v. Hall, 847 S.W.2d 208, 211
(Tenn. 1993). On a motion for summary judgment, the court must take the strongest legitimate view
of the evidence in favor of the nonmoving party, allow all reasonable inferences in favor of that
party, and discard all countervailing evidence. Id. at 210-11. Summary judgment is only
appropriate when the facts and the legal conclusions drawn from the facts reasonably permit only
one conclusion. Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn. 1995). Since only questions of law
are involved, there is no presumption of correctness regarding a trial court's grant of summary
judgment. Id. Therefore, our review of the trial court’s grant of summary judgment is de novo on
the record before this Court. Id.
Generally, trust instruments are interpreted in the same manner as contracts, deeds, or wills.
Marks v. Southern Trust Co., 203 Tenn. 200, 205, 310 S.W.2d 435, 437-38 (1958). Determining
the intent of the settlor is of primary importance. Id. at 205, 310 S.W.2d at 438. This intent is
normally ascertained by looking to the four corners of the instrument, giving no provision greater
emphasis than any another. Id. Even so, “[i]t is not necessarily so much the language that is used
by the settlor as it is his or her evident intention which governs.” Id. If the instrument is ambiguous,
the intent of the settlor is to be determined not only from the provisions of the trust instrument but
also from the surrounding facts and circumstances. See HMF Trust v. Bankers Trust Co., 827
S.W.2d 296, 299 (Tenn. App. 1991).
The Trust stated that the trust funds were to be distributed only when Aqua Yacht acquired
a warranty deed to the property on which the slips were located. Other language in the Trust,
however, indicates the reason for requiring a warranty deed. In the same sentence as the requirement
for a warranty deed, the Trust states that Aqua Yacht must deliver to FATC a warranty deed
“whereby Lessor shall have sufficient power in accordance with applicable law to deliver Leases to
Lessees.” This qualifying language makes it clear that the settlor required a warranty deed in order
to deliver the required leases. See Marks, 203 Tenn. at 205, 310 S.W.2d at 438 (stressing the
importance of the settlor’s intent “as evidenced by all the provisions of the instrument.”). Therefore,
the language of the Trust evidences the settlor’s intent that Aqua Yacht be required to demonstrate
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its ability to deliver the leases before FATC could distribute the trust funds. The language of the
Trust is unambiguous; consequently, extrinsic evidence is not required. However, the record
includes the lease contracts and an affidavit from Benard Blasingame, Aqua Yacht’s president and
general partner, both of which support the conclusion that the intent in setting up the Trust was to
require Aqua Yacht to demonstrate that it could provide the lessees with valid leases, prior to
receiving the trust funds. Consequently, so long as the Memorandum and Limited Power of
Attorney were sufficient for Aqua Yacht to deliver the required leases, the purpose of the Trust
would be fulfilled. See HMF Trust, 827 S.W.2d at 299.
Wolfe contends on appeal that the trial court erred in holding that the Memorandum and
Limited Power of Attorney was the functional and legal equivalent of a warranty deed under
Mississippi law. The Memorandum and Limited Power of Attorney entered into between Benard
Blasingame and J. C. Edge, the fee holder of the land where the marina was located, provides that
Aqua Yacht shall have:
the full right and authority to execute on his [Edge’s] behalf, his consent to any and
all documents reasonably required to transfer or assign to any Aqua Lessee all of
Edge’s interest in that portion of the Property described in any Aqua Lease to allow
the Aqua Lease to be fully effective in accordance with its terms as if Aqua Yacht
Harbor Marina Limited Partnership (“the Limited Partnership”) was the fee holder,
thereby allowing the Limited Partnership to have sufficient power in accordance with
applicable law to execute fully effective Aqua Leases with the Aqua Lessees.
The agreement was irrevocable and provided that the leases would be for ninety-nine years.
Because the property in question is situated in Mississippi, the “applicable law” referred to
in the Memorandum and Limited Power of Attorney is Mississippi law. Mississippi law allows an
attorney-in-fact to convey property in the name of his principal.1 Miss. Code Ann. § 87-3-3 (1972).
In addition, “[a] letter of attorney to transact any business need only express plainly the authority
conferred.” Miss. Code Ann. § 87-3-7 (1972). Therefore, the Memorandum and Limited Power of
Attorney was sufficient to empower Aqua Yacht to deliver ninety-nine-year leases to the lessees.
1
Mississippi Code Annotated § 87-3-3 provides:
Conveyances of land, or contracts relating thereto, executed by an attorney
in fact for his principal, and duly acknowledged or proved, shall have the same
force and effect as if executed and acknowledged by the principal; and where a
conveyance by an attorney is in execution of letters of attorney, so acknowledged
or proved and recorded, it shall pass the interest of the principal though not
formally executed in his name.
Miss. Code Ann. § 87-3-3 (1972).
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On appeal, Wolfe argues only that a Memorandum and Limited Power of Attorney is not a
warranty deed; the record includes no evidence that the Memorandum and Limited Power of
Attorney was insufficient to permit Aqua Yacht to deliver the required leases. It is undisputed that
Wolfe has enjoyed the right to use his boat slip since his lease was executed, and that no one has
challenged his right to the boat slip. Since the Memorandum and Limited Power of Attorney gave
Aqua Yacht authority to deliver the leases, it satisfied the condition precedent to the distribution of
the trust funds. The trial court is affirmed on this issue.
Wolfe argues that he relied on the Trust to recoup his investment if Aqua Yacht failed to
honor the Guaranteed Right of Resale. If he decided to exercise his option and Aqua Yacht could
not perform, he could petition FATC as Trustee for the return of his money from the trust funds. If
the funds had been distributed to Aqua Yacht, Wolfe could then sue Aqua Yacht and attach the land
for satisfaction of his judgment. In this case, however, the trust funds had been distributed to Aqua
Yacht and used to pay creditors, and Aqua Yacht did not own the land on which the marina was
situated.
The trial court found that Wolfe was improperly attempting to “place FATC in the position
of a guarantor or insurer of Aqua as to an agreement between Aqua and Wolfe that was never
disclosed to FATC and was not part of the Trust.” See Young v. Phillips, 170 Tenn. 169, 174, 93
S.W.2d 634, 636 (1936) (“It must be borne in mind that trustees are not insurers . . . .”). Wolfe
points to no evidence in the record that FATC had any knowledge of the Guaranteed Right of Resale.
So long as FATC fulfilled the purpose of the Trust by requiring Aqua Yacht to demonstrate it could
deliver the required leases, FATC cannot be held liable for a contract to which it was not a party and
of which it had no knowledge. The trial court is affirmed on this issue as well.
In sum, the language of the Trust demonstrates that the settlor’s intent was to require Aqua
Yacht to demonstrate its ability to deliver the required leases as a condition precedent to FATC’s
distribution of trust funds. The Memorandum and Limited Power of Attorney was sufficient under
Mississippi law to give Aqua Yacht the ability to deliver the leases. FATC cannot be required to act
as guarantor for Wolfe’s Guaranteed Right of Resale, an agreement of which it had no knowledge.
Our affirmance of the trial court on these issues pretermits the remaining issues raised by Wolfe on
appeal.
The decision of the trial court is affirmed. Costs are assessed against Appellant, for which
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execution may issue if necessary.
HOLLY KIRBY LILLARD, J.
CONCUR:
ALAN E. HIGHERS, J.
DAVID R. FARMER, J.
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