Dorothy R. W. Barham v. Diane W. Cooper

IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
______________________________________________
DOROTHY R. W. BARHAM,
Plaintiff-Appellant,
Shelby Equity No. 101702-3
Vs. C.A. No. 02A01-9608-CH-00200
DIANE W. COOPER,
Defendant-Appellee.
____________________________________________________________________________
FROM THE SHELBY COUNTY CHANCERY COURT
THE HONORABLE D. J. ALISSANDRATOS, CHANCELLOR
Clyde W. Keenan; Keenan, Fox & Dabbous of Memphis
For Appellant
Charles E. Hodum and Mitzie C. Johnson of Collierville
For Appellee
AFFIRMED AND REMANDED
Opinion filed:
FILED
September 5, 1997
Cecil Crowson, Jr.
Appellate C ourt Clerk
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
CONCUR:
ALAN E. HIGHERS, JUDGE
HOLLY KIRBY LILLARD, JUDGE
This case involves a complaint for an accounting and injunctive relief. Plaintiff, Dorothy
R. W. Barham, appeals the order of the trial court affirming the report of the Special Master in
favor of defendant, Diane W. Cooper.
Barham and Cooper are sisters, and Cooper controlled Barham’s finances pursuant to a
general power of attorney executed by Barham. On July 17, 1992, Barham filed a complaint
against Cooper in the Chancery Court of Shelby County requesting an accounting, the
appointment of a Special Master, and an injunction preventing Cooper from disposing of any of
Barham’s property. On July 28, 1992, the trial court issued a temporary retraining order against
Cooper.1 On October 30, 1992, Cooper filed an answer that denied the material allegations of
the complaint.
On March 11, 1994, Barham filed an amended complaint adding the allegations of undue
influence and overreaching. The amended complaint alleges that Cooper induced Barham to
enter into a fraudulent contract for the sale of Barham’s home. The amended complaint further
alleges that Cooper willfully and maliciously exercised control over Barham’s property and
converted the property to her own use. On June 6, 1995, Cooper once again filed an answer
denying the material allegations.
On March 22, 1995, a consent order was entered appointing a Special Master. The
consent order provides that the Special Master was appointed for the following purposes: 1) to
conduct an accounting of the financial transactions executed by Cooper on behalf of Barham
under the fiduciary duties created by the power of attorney executed by Barham on July 11,
1984; 2) to rule on the admissibility of certain transactions and expenses submitted by Cooper;
and 3) to decide the issues of whether Barham was the victim of fraud, undue influence, or
overreaching.
The Special Master conducted evidentiary hearings on June 13 and 14, 1995. On January
2, 1996, the Special Master filed a report that made detailed findings of fact including the
following:
Barham suffered through an abusive marriage for most of
her married life. She and her husband divorced, and in the
divorce settlement Barham received the marital home and
$10,000.00. During her marriage, Barham relied upon Cooper for
1
The record indicates that a temporary restraining order was issued, but the record is
silent as to any subsequent proceedings for injunctive relief until Barham filed a motion for
an injunction on December 10, 1993. Apparently, the motion was never acted upon.
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help. After the divorce, Barham began living with her ex-
husband again. On May 27, 1984, Barham shot and killed her ex-
husband, and she was arrested and charged with murder. Cooper
hired and paid for a lawyer and posted bond for Barham.
On June 4, 1984, Barham was released from jail and was
admitted to the Memphis Mental Health Institute (MMHI) for
psychiatric evaluation and treatment. She was diagnosed as
depressed and having a dependent personality, but she was not
diagnosed as mentally incompetent. Cooper continued to help
Barham while Barham was at MMHI. On July 11, 1984, Barham
executed a general power of attorney appointing Cooper as her
attorney. The primary reason for the power of attorney was to
allow Cooper to rent Barham’s home, which remained vacant
while she was at MMHI, to collect rent, and to do the necessary
repairs. Cooper did much of the work herself and arranged for
the remainder of the repairs. Barham did not have any funds of
her own because she spent the divorce settlement money.
Cooper opened a joint bank account in both her name and
Barham’s name to deposit the rent money. She used this account
to pay for repairs and necessities for Barham. This account
remained open until December 6, 1985, at which time the balance
of $1,084.42 was transferred to a new, separate account in
Cooper’s name only. In December 1985, Barham received two
checks from her ex-husband’s life insurance totaling $10,042.59.
Cooper deposited these checks into her separate account and
reimbursed herself for the $5,000.00 attorney’s fee and the
$500.00 bond.
Barham was confined at MMHI until October 14, 1984
and then was released to a half-way house where she stayed until
February 1986. On February 14, 1985, Barham pled guilty to
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voluntary manslaughter, but she received a suspended sentence.
In March 1986, Barham was not taking her medicine, and she
threatened suicide. Cooper persuaded Barham to check into
Baptist Memorial Hospital where she stayed for six weeks. Upon
leaving the hospital, Barham rented a house, and she appeared to
be much improved.
On July 20, 1986, Barham and Cooper signed an
agreement that provided that Barham owed Cooper $29,000.00
and that she would quit-claim her house to Cooper for the purpose
of selling the house. Cooper was entitled to the first $29,000.00
of the proceeds of the sale, and Barham was entitled to any
balance. Barham signed the quit-claim deed on July 20, 1986.
Barham did not complain to Cooper about the agreement and the
quit-claim deed until shortly before filing the complaint in this
case in July 1992.
In October 1986, Cooper received $36,143.00 from the
sale of Barham’s residence, and the proceeds were deposited into
Cooper’s bank account. In March 1987, Cooper took $30,013.06
from the proceeds and purchased 2,282 shares of a Putnam
Investment Mutual Fund in her own name. It was Cooper’s
intention to send Barham a monthly dividend check as long as
Barham needed one. Between December 1986 and June 1992
when this suit was filed, Cooper sent Barham $11,500.00 from
the dividends from the Putnam fund. Although the Putnam fund
currently has the same number of shares as it did in March 1987,
the value of the fund has dropped considerably and is now worth
approximately $17,000.00.
Cooper helped Barham obtain her social security benefits,
and in the spring of 1986, Barham finally began receiving social
security checks. Cooper deposited the initial lump sum check in
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the amount of $5,372.00 in her personal account. In September
1986, Cooper opened a personal account for Barham in Barham’s
name only. The account was opened so Barham could write her
own checks, and the account was started from an initial deposit
of the August and September 1986 social security checks totaling
$672.00. After September 1986, the social security checks were
directly deposited into Barham’s personal account.
After examining the facts, the Special Master first found that Barham had independent
advice from her mother and the opportunity for independent advice from her attorney. The
Special Master found that there was no misappropriation of funds, no breach of a fiduciary duty,
and no undue influence or overreaching by Cooper. The Special Master found that there was an
oral agreement between Cooper and Barham for Barham to receive the interest or dividend
proceeds from the Putnam Fund. The Special Master specifically found that Cooper was not
“short-changing” Barham, but instead, that the Putnam fund dropped in value. Finally, the
Special Master found that Cooper was the owner of the corpus of the Putnam fund, and Barham
was entitled to interest or dividends from the fund. The Special Master assessed costs against
Barham because Cooper was not at fault and breached no fiduciary duty.
Barham filed exceptions to the Special Master’s report, and a hearing on the exceptions
was held on March 20, 1996. On April 17, 1996, the trial court entered an order denying
Barham’s exceptions and affirming the Special Master’s report. The order recited the
chancellor’s concurrence with the Special Master’s findings of fact including the findings that
Cooper did not breach her fiduciary duty, that Barham had the opportunity for independent
advice, and that Cooper did not exert undue influence. The trial court also concurred in the
Special Master’s accounting.
Barham appeals the order of the trial court affirming the findings of the Special Master
and presents the following issues for review:
1) whether the Special Master erred by failing to find that the
execution of a power of attorney created a fiduciary duty between
Barham and Cooper;
2) whether the Special Master erred by failing to recognize the
existence of a presumption of undue influence and to shift the
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burden to Cooper once a fiduciary duty was established;
3) whether the Special Master erred by failing to recognize that
the shifted burden of proof is raised to the level of clear and
convincing evidence;
4) whether the Special Master erred in finding that Barham had
independent advice or opportunity for independent advice;
5) whether the Special Master erred in finding that Barham was
not subjected to undue influence and overreaching;
6) whether the Special Master erred in finding a proper
accounting on the part of the Cooper;
7) whether the trial court erred in refusing to allow Barham to
present additional evidence, newly discovered following the
hearings before the Special Master to the court; and
8) whether the trial court erred in adopting the findings of the
Special Master, which were contrary to the weight of the
evidence.
Concurrent findings by the master and trial court are conclusive on appeal unless (1) the
issue should not have been referred to the master; (2) the findings are based on an error of law;
(3) the findings involve a question of law or a mixed question of law and fact; or (4) the findings
are not supported by substantial and material evidence. Shepherd v. Griffin, 929 S.W.2d 336,
344 (Tenn. App. 1995); see also T.C.A. § 27-1-113 (1980).
Barham first argues that the Special Master erred by failing to find that the execution of
a power of attorney created a confidential relationship between Barham and Cooper. A person
authorized to act on behalf of another by virtue of an unrestricted power of attorney has a
confidential relationship with the person who executed the power of attorney. Mitchell v. Smith,
779 S.W.2d 384, 389 (Tenn. App. 1989). In this case, it is undisputed that Barham executed a
power of attorney in favor of Cooper and, therefore, that Barham and Cooper are in a
confidential relationship. However, the Special Master did not fail to find that the power of
attorney created a fiduciary duty. Instead, the Special Master found that Cooper had not
breached her fiduciary duty, and necessary to this holding is a finding that a fiduciary duty
existed in the first place. This issue is without merit.
We will consider Barham’s second and third issues together. Barham argues that the
Special Master erred by failing to recognize the existence of a presumption of undue influence
and by failing to shift the burden to the level of clear and convincing evidence to Cooper.
The existence of a confidential relationship, followed by a transaction wherein the
dominant party receives a benefit from the other party, gives rise to a presumption of undue
influence that may be rebutted only by clear and convincing evidence of the fairness of the
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transaction. Matlock v. Simpson, 902 S.W.2d 384, 386 (Tenn. 1995). Cooper argues that a
relationship between family members does not always create a confidential relationship and does
not always give rise to a presumption of undue influence. The relations between family
members and relatives are not, in and of themselves, confidential relationships. Mitchell, 779
S.W.2d at 389. However, in this case, Barham executed a power of attorney that gave Cooper
full control of Barham’s finances. As stated above, a person authorized to act on behalf of
another by virtue of an unrestricted power of attorney has a confidential relationship with a
person who executed the power of attorney. Id. Because the power of attorney executed in favor
of Cooper created a confidential relationship and Cooper received a benefit from the sale of
Barham’s house, we believe that a presumption of undue influence was present in this case, and
therefore, the burden was on Cooper to prove the fairness of the transaction by clear and
convincing evidence.
Barham asserts that the Special Master’s report did not take into account the shifted
burden of proof. Although the Special Master did not specifically refer to the standard of proof
required to overcome the presumption in the master’s report, we believe that the Special Master
properly considered the shifted burden. In closing remarks before the Special Master, Barham’s
attorney’s last statement was, “And once that happens [the existence of a confidential
relationship] the burden shifts to the fiduciary to come forward and properly account for all the
funds, and we would move the Court to grant the relief that we have requested.” The Special
Master responded, “Okay. I thank you very much.” The Special Master found that Cooper
overcame the presumption of undue influence by proving the nonexistence of undue influence.
In the order affirming the Special Master’s findings, the trial court stated that “the Special
Master’s report is clear and follows the law.” The trial court also stated, “The Court additionally
finds that the Special Master found by clear and convincing evidence that the burden of proof
has been carried by clear and convincing proof, and that there has been no breach of fiduciary
duty by the Defendant, Diane W. Cooper.” It appears that the burden of proof was properly
shifted to Cooper in this case.
Barham next argues that the Special Master erred in finding that she had independent
advice from her mother and the opportunity for independent advice from an attorney. One way
to prove the fairness of the transaction is to show that the grantor had the benefit of competent,
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independent advice on the advisability of making the gift or conveyance. Richmond v.
Christian, 555 S.W.2d 105, 107-08 (Tenn. 1977). This advice need not be contemporaneous
with or immediately preceding the gift or conveyance. Brown v. Weik, 725 S.W.2d 938, 945
(Tenn. App. 1983). In Turner v. Leathers, 191 Tenn. 292, 232 S.W.2d 269 (1950), the
Tennessee Supreme Court discussed the content and extent of independent advice necessary to
overcome the presumption of invalidity:
Proper independent advice in this connection means that the
donor had the [preliminary] benefit of conferring fully and
privately upon the subject of his intended gift with a person who
was not only competent to inform him correctly as to its legal
effect, but who was furthermore so disassociated from the
interests of the donee as to be in a position to advise with the
donor impartially and confidently as to the consequences to
himself of his proposed benefactions.
Id. at 297-98, 232 S.W.2d at 271 (citations omitted). The rule of independent advice means that
the adviser must not only be competent but independent. Id. at 297, 232 S.W.2d at 271.
We believe that the Special Master’s finding that Barham had independent advice is not
supported by substantial and material evidence. See Shepherd, 929 S.W.2d at 344. Barham
consulted with her mother before quit-claiming her house to Cooper, but Barham’s mother is
also Cooper’s mother. Barham testified that she wanted to sue her mother also, but that her
mother died. The attorney who prepared the quit-claim deed was the same attorney who assisted
Barham in litigation to recover her ex-husband’s life insurance proceeds. Barham had the
opportunity to speak with the attorney concerning the quit-claim deed, but there is no evidence
that she actually met with him. Barham did not have independent advice on the advisability of
making the conveyance of her house. However, proof of independent advice is only one means
of overcoming the presumption, and proof of independent advice is not necessary in all cases.
Richmond, 555 S.W.2d at 107-08; Gordon v. Thornton, 584 S.W.2d 655, 658 (Tenn. App.
1979).
Barham next argues that the Special Master erred in finding that she was not subjected
to undue influence, and she asserts that the Special Master failed to take into account her
diminished capacity. Cooper, on the other hand, argues that there was no proof of diminished
capacity and that Barham had knowledge of all of the transactions.
Evidence of one party’s deteriorated mental or physical condition will substantiate the
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existence of a confidential relationship as well as the ability of the dominant party to influence
the weaker party, and the weaker party need not be legally insane. Williamson v. Upchurch, 768
S.W.2d 265, 270 (Tenn. App. 1988). Any condition rendering the weaker party unable to guard
against the dominant party’s imposition or undue influence is sufficient. Id. The question to be
answered is not whether the weaker party’s decision was a good one, or even whether the weaker
party knew what he or she was doing at the time, but instead, the courts must determine whether
the weaker party’s decision was a free and independent one or whether it was induced by the
dominant party. Id.
The Special Master found that Barham was diagnosed as depressed and having a
dependent personality, but that she was not diagnosed as mentally incompetent. There is proof
in the record that Barham was depressed, but the record does not show that her mental condition
deteriorated. She has not shown a condition that made her unable to guard against Cooper’s
influence. We believe that the Special Master considered Barham’s mental condition and her
confinement at MMHI in reaching his decision.
We also believe that the Special Master correctly found that Barham was not subjected
to undue influence. Transactions between persons in a confidential relationship are not
automatically invalid, but the relationship of trust and confidence between persons in a fiduciary
relationship commands the close attention of the courts to the fairness of any transaction between
them. Security Federal Sav. & Loan Ass’n of Nashville v. Riviera Ltd., 856 S.W.2d 709, 714
(Tenn. App. 1992). The law raises a presumption that the transaction is invalid and the evidence
required to overcome the presumption is determined by the circumstances of each case. Id. The
factors that are important in determining whether a transaction is fair include: (1) whether the
fiduciary made a full and frank disclosure of all relevant information within his possession; (2)
whether the consideration was adequate; and (3) whether the principal had independent advice
before completing the transaction. Id. (citations omitted).
Cooper testified that she did not request the agreement evidencing the $29,000.00 debt,
nor did she request the quit-claim deed. She testified that it was what Barham wanted to do after
discussing it with their mother and that Barham decided that it should be done to repay Cooper
for her help. In addition, Cooper presented a letter from Barham that showed Barham’s love and
gratitude toward Cooper. The Special Master found that the testimony was clear that Cooper
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helped Barham in almost every conceivable way. Cooper handled the rental and repairs of the
property, took Barham to the store and the doctor, and “did just about everything a person could
do for another.” Because evidence in the record supports the concurrent finding that there was
no undue influence, this Court cannot disturb the findings on appeal. Shepherd, 929 S.W.2d at
344.
Barham next argues that the Special Master erred in finding a proper accounting on
Cooper’s part. Barham asserts that Cooper failed or refused to produce all of the documents in
her possession and that she cannot account for social security checks totaling $6,500.00. Cooper
was unable to find six months worth of bank statements, and she testified that she searched for
them and asked the bank for copies of them. Cooper also testified that she deposited the social
security checks.
When the resolution of the issues in a case depends upon the truthfulness of witnesses,
the trial judge who has the opportunity to observe the witnesses in their manner and demeanor
while testifying is in a far better position than this Court to decide those issues. Mays v.
Brighton Bank, 832 S.W.2d 347, 351-52 (Tenn. App. 1992). The weight, faith, and credit to
be given to any witness’s testimony lie in the first instance with the trier of fact, and the
credibility accorded will be given great weight by the appellate court. Id. at 352.
The Special Master found that Cooper deposited the social security checks and that the
bank statements show nothing unusual or improper. The Special Master stated, “It is unfortunate
that these 1986 bank statements cannot be found; however, your Master finds nothing to indicate
any wrongdoing on the part of Mrs. Cooper.” The trial court affirmed the findings of the Special
Master and stated, “The Court further finds that the Defendant, Diane W. Cooper, is an honest
person and credible and confirms the Special Master’s report that a proper accounting was done.”
We are bound by these concurrent findings because the findings are supported by
substantial and material evidence. Shepherd, 929 S.W.2d at 344.
After the Special Master filed his report, the trial court refused to allow Barham to
present additional witnesses who would testify about the real estate transfer. Barham argues that
the trial court erred in refusing the additional evidence. The Tennessee Rules of Civil Procedure
provide that “The court after hearing may adopt the report or may modify it or may reject it in
whole or in part or may receive further evidence or may recommit it with instructions.” Tenn.
10
Rawle Civ. P. 53.04(2). The trial court is not required to entertain additional witnesses, but has the
discretion to do so. In this case, the trial court noted that the complaint was filed in 1992 and
that the hearing was held in 1995, but that the additional witnesses did not come forward until
1996 to recount conversations with Barham in 1986, 1987, and 1988. We find that the trial court
did not abuse its discretion by rejecting the additional testimony.
Finally, Barham argues that the trial court erred in adopting the findings of the Special
Master because she contends that the findings are contrary to the weight of the evidence. This
Court must affirm the concurrent findings of the Special Master and the trial court if there is any
material evidence to support the trial court’s concurrence. Archer v. Archer, 907 S.W.2d 412,
415 (Tenn. App. 1995). As stated above, we find that Cooper has shown the nonexistence of
undue influence, which overcomes the presumption, and that the evidence in the records supports
the concurrent findings of the Special Master and the trial court.
Accordingly, the order of the trial court affirming the Special Master’s report is affirmed.
This case is remanded to the trial court for such further proceedings as necessary, including
provisions for payment of the interest income to Barham. Costs of appeal are assessed against
the appellant.
_________________________________
W. FRANK CRAWFORD,
PRESIDING JUDGE, W.S.
CONCUR:
____________________________________
ALAN E. HIGHERS, JUDGE
____________________________________
HOLLY KIRBY LILLARD, JUDGE
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