In Re: Estate of James E. Miller ( 2017 )

06/29/2017
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
February 27, 2017 Session
IN RE ESTATE OF JAMES E. MILLER
Appeal from the Probate Court for Monroe County
No. 2010-117 Dwaine B. Thomas, Judge
No. E2016-01047-COA-R3-CV
This is a probate case. Vickie Miller (Widow), personal representative of the estate of
her late husband, James E. Miller (Decedent), petitioned the trial court for letters of
administration. Decedent died intestate on July 17, 2010. At issue is the ownership of
Jim Miller Excavating Company, Inc. (the corporation), the company operated by the
Decedent. Widow argues that she is the owner of all of the 1,000 shares of stock that the
corporation issued to “Jim Miller and Vicky [sic] Miller JTROS” shortly after the
company’s incorporation on April 3, 1990. She filed a copy of the stock certificate, dated
April 30, 1990. Mechelle Miller and Jamie L. Shannon, Decedent’s daughters and heirs
of the estate, argue that the stock certificate was invalid and that the corporation’s assets
should be part of Decedent’s estate. The daughters filed a copy of the corporation’s
bylaws, in which the following language is found: “the Board of Directors shall consist
of one individual, to-wit, its sole shareholder, James E. Miller.” The trial court granted
Widow’s motion for summary judgment. Only Mechelle Miller appealed. We hold that
there is a genuine issue of material fact as to whether the corporation’s directors and
incorporators intended that the company would be owned by Decedent and Widow as
joint tenants with the right of survivorship. We vacate the trial court’s summary
judgment and remand for further proceedings.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Probate Court
Vacated; Case Remanded
CHARLES D. SUSANO, JR., J., delivered the opinion of the court, in which D. MICHAEL
SWINEY, C.J., and THOMAS R. FRIERSON, II, J., joined.
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Mark Jendrek, John M. Lawhorn, and Richard E. Graves, Knoxville, Tennessee, for
appellant, Mechelle Miller.
John W. Cleveland, Sr., Sweetwater, Tennessee, for appellee, Vickie C. Miller, personal
representative and administrator of the estate of James E. Miller.
OPINION
I.
It is not disputed that Jim Miller Excavating Company was duly incorporated.
Patrick H. Grant, an accountant who incorporated the business, signed the corporate
charter on March 31, 1990. The Secretary of State received it on April 3, 1990. The
charter authorizes the issuance of 1,000 shares of stock. Widow filed the affidavit of
incorporator Grant, who testified in pertinent part as follows:
[A]s part of my practice as an accountant, I prepared
documents as the incorporator for filing with the Secretary of
State of . . . Tennessee to create corporations for my clients.
I met Jim Miller through one of my other bookkeeping clients
and agreed to keep his records and prepare his tax returns. . . .
In March, 1990, I incorporated Jim Miller Excavating Co.,
Inc. Jim Miller was the President, his wife, Vickie Miller was
the Vice President and I was the Secretary.
. . . I told him I had better put both names on the stock
certificate in case he came to a sudden end. We both laughed.
Little did we know he would be murdered 20 years later. I
issued the stock to Jim Miller and Vicky Miller JTROS, my
abbreviation for Joint Tenants with Right of Survivorship.
(Paragraph numbering in original omitted.) Grant further stated that in 2000, he turned
over the bookkeeping duties of the corporation to another accountant. He later resigned
as the corporation’s secretary.
Widow also filed her own affidavit, testifying, similarly to Grant, as follows:
In March, 1990, [Decedent] and I incorporated Jim Miller
Excavating Co., Inc. The shares of stock were issued to Jim
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Miller and Vicky Miller JTROS, as Joint Tenants with Right
of Survivorship. A copy of the original stock certificate
issued for 1000 shares of stock in Jim Miller Excavating Co.,
Inc., issued to Jim Miller and Vicky Miller, JTROS is
attached as Exhibit A to this Affidavit[.]
The original stock certificate was never endorsed to transfer
any of the stock to any other person, no shareholder
agreement or buy-sell agreement was ever executed after the
incorporation of Jim Miller Excavating Co., Inc., and when
Jim Miller died, he and Vickie Miller still owned all of the
shares of stock in Jim Miller Excavating Co., Inc., as joint
tenants with right of survivorship.
(Paragraph numbering in original omitted.) The stock certificate is signed by Patrick
Grant on a signature line designated “Secretary.”
Widow filed a motion for summary judgment, alleging, among other things, that
“the shares of stock in [the corporation] passed to [Widow] as surviving joint tenant with
right of survivorship.” The daughters opposed the motion, arguing that the stock
certificate “is defective on its face,” citing Tenn. Code Ann. § 48-16-206(d)(1) (2012),
which provides that a share certificate issued by a corporation “shall be signed . . . by two
(2) officers designated in the bylaws or by the board of directors.” Widow countered by
citing subsection (a) of the same statute, which states that “[s]hares may but need not be
represented by certificates,” and arguing that even if there was a technical defect resulting
from the lack of a second signature, the clear intent of the incorporators and directors was
to issue 1,000 shares of stock to Decedent and Widow as joint tenants with the right of
survivorship. The daughters also pointed to a provision in the corporate bylaws, which
had been produced by Widow in her discovery responses, that refers to Decedent as the
corporation’s “sole shareholder.” In addition, they filed the affidavit of Wayman B.
Pritchard, who testified that he was a friend and business associate of Decedent, who had
told him in 2007 that Decedent “owned all the shares of Jim Miller Excavating himself,
explaining that his wife did not have any ownership interest in the corporation ‒ he was
the sole shareholder.” Widow objected to this affidavit on several grounds, including that
it was inadmissible hearsay.
Following a hearing, the transcript of which is not included in the record, the trial
court granted Widow summary judgment in an order providing, in pertinent part, as
follows:
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[T]he copy of the Stock Certificate, the Charter, the affidavit
of the Incorporator and the affidavit of Mrs. Vickie Miller all
support the notion that all involved in the formation of Jim
Miller Excavating Co. Inc. were all of one mind and accord in
the issuance of all stock to [Decedent and Widow] as Joint
Tenants with the Right of Survivorship.
* * *
The averments of the Non-Movants as to representations
made by [Decedent] as to his sole ownership are not
substantial enough to raise question as to the legal ownership
of the corporate stock. . . . These allegations, though
supported by an affidavit, are not supported with credible
evidence sufficient to negate the granting of [s]ummary
[j]udgment.
* * *
The issue of the [c]orporate [b]y-laws having a different
ownership listed is perplexing but not fatal to the argument
for [s]ummary [j]udgment. . . . It is this Court’s opinion that
the discrepancy in the corporate by-laws does not negate the
issuance of shares with right of survivorship.
Daughter Mechelle Miller timely filed a notice of appeal.
II.
The issue before us is whether the trial court erred in granting summary judgment
to Widow. Our standard of review of a grant of summary judgment is as stated by the
Supreme Court:
Summary judgment is appropriate when “the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” Tenn. R.
Civ. P. 56.04. We review a trial court’s ruling on a motion
for summary judgment de novo, without a presumption of
correctness.
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* * *
[I]n Tennessee, as in the federal system, when the moving
party does not bear the burden of proof at trial, the moving
party may satisfy its burden of production either (1) by
affirmatively negating an essential element of the nonmoving
party’s claim or (2) by demonstrating that the nonmoving
party’s evidence at the summary judgment stage is
insufficient to establish the nonmoving party’s claim or
defense. . . . The nonmoving party must demonstrate the
existence of specific facts in the record which could lead a
rational trier of fact to find in favor of the nonmoving party.
Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250, 264-65 (Tenn.
2015) (emphasis in original).
In making the determination of whether summary judgment was correctly granted,
[w]e must view all of the evidence in the light most favorable
to the nonmoving party and resolve all factual inferences in
the nonmoving party’s favor. Martin v. Norfolk S. Ry. Co.,
271 S.W.3d 76, 84 (Tenn. 2008); Luther v. Compton, 5
S.W.3d 635, 639 (Tenn. 1999); Muhlheim v. Knox Cnty. Bd.
of Educ., 2 S.W.3d 927, 929 (Tenn. 1999). If the undisputed
facts support only one conclusion, then the court’s summary
judgment will be upheld because the moving party was
entitled to judgment as a matter of law. See White v.
Lawrence, 975 S.W.2d 525, 529 (Tenn. 1998); McCall v.
Wilder, 913 S.W.2d 150, 153 (Tenn. 1995).
Wells Fargo Bank, N.A. v. Lockett, No. E2013-02186-COA-R3-CV, 2014 WL 1673745
at *2 (Tenn. Ct. App., filed Apr. 24, 2014).
III.
The question of the ownership of the corporate stock in this case turns upon the
intent of the directors and incorporators. In Merchants & Planters Bank v. Myers, 644
S.W.2d 683, 689 (Tenn. Ct. App. 1982), this Court stated,
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In this jurisdiction, the contract approach to questions of joint
ownership has supplanted the common law approach of joint
tenancy with its requirement of four unities. See Lowry v.
Lowry, 541 S.W.2d 128 (Tenn. 1976); Jones et al. v. Jones et
al., 185 Tenn. 586, 206 S.W.2d 801 (1947). Under the
contract theory, . . . the issue is whether the parties intended
to create a right of survivorship. Simmons v. Foster, 622
S.W.2d 838 (Tenn. App. 1981). This intent may be shown by
signed bank signature cards which express the contractual
right of survivorship. Melhorn v. Melhorn, 208 Tenn. 678,
348 S.W.2d 319 (1961); Iacometti v. Frassinelli, 494 S.W.2d
496 (Tenn. App. 1973). Tennessee courts have recognized
that intent as to type of ownership may be established by
extrinsic evidence. Griffin v. Prince, 632 S.W.2d 532 (Tenn.
1982); Simmons v. Foster, supra; Buntin v. Meriwether, 56
Tenn.App. 492, 408 S.W.2d 667 (1966).
Married spouses can hold both real and personal property as tenants by the entirety, a
form of ownership that also includes the right of survivorship:
Tenancy by the entirety is a form of property ownership
unique to married persons, and it is well-settled in Tennessee
that personal property, as well as realty, may be owned by
spouses by the entirety. Griffin v. Prince, 632 S.W.2d 532
(Tenn. 1982); see Mays v. Brighton Bank, 832 S.W.2d 347
(Tenn. App. 1992). In Griffin, the Court said:
It is, of course, legally permissible for a
husband and wife to own either real or personal
property in any manner they choose, such as
tenants in common, individually, in partnership,
as life tenant and remainderman, or any other.
(citations omitted)
* * *
It is well settled in this state that the words of a
conveyance or legal instrument which would
make two other persons joint tenants under the
common law, or tenants in common . . . will
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create tenancy by the entirety in a husband and
wife. (citations omitted)
This Court has permitted the use of extrinsic
evidence to establish the type of ownership
intended by the parties, and has gone very far in
finding that spouses owned real or personal
property as tenants by the entirety, despite the
fact that a title document indicated otherwise.
Catt v. Catt, 866 S.W.2d 570, 573 (Tenn. Ct. App. 1993); see also White v. Watson, 571
S.W.2d 493, 495 (Tenn. Ct. App. 1978); Lamberth v. S & L Plumbing Co., 935 S.W.2d
411, 412 (Tenn. Ct. App. 1996).
In the present case, Widow has presented affidavits supporting the conclusion that
she, Decedent, and incorporator Grant intended to issue the stock to Widow and
Decedent as joint tenants with right of survivorship. The stock certificate also supports
this argument. Although the certificate is not signed by two corporate directors or
officers as directed by Tenn. Code Ann. § 48-16-206(d)(1), this Court has recently
observed that
[o]wnership of shares of corporate stock is not required to be
represented by stock certificates. See Tenn. Code Ann. § 48–
16–206 (2012). Furthermore, unless expressly provided
otherwise, a shareholder’s rights and obligations are identical
with or without representation by a stock certificate. Id.; see
Leimas v. Davies, No. 01A01–9303–CH–00127, 1993 WL
404147, at *5 (Tenn. Ct. App. Oct. 8, 1993) (citing
Cartwright v. Dickinson, 12 S.W. 1030 (Tenn. 1890)). Stock
certificates are “mere evidence of ownership of shares of
corporate stock.” Leimas, 1993 WL 404147, at *5 (citing
Young v. South Tredegar Iron Co., 2 S.W. 202 (Tenn.
1886)). Moreover, our Supreme Court has held: “A sale or
transfer of stock, to be valid, need not be in writing. The
certificate need not, in fact, be delivered. A transfer is
perfectly good, although the seller of the stock never had a
certificate at all, and although no certificate is issued to the
transferee.” Parker v. Bethel Hotel Co., 34 S.W. 209, 216
(Tenn. 1896).
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Powers v. A & W Supply, Inc., No. E2016-01489-COA-R9-CV, 2017 WL 1066791, at
*7 (Tenn. Ct. App., filed Mar. 21, 2017). We are of the opinion that the two-signature
requirement of Tenn. Code Ann. § 48-16-206(d)(1) does not preclude the trial court’s
consideration of the certificate as evidence on the question of the intent of the issuers of
the stock.
Daughter, on the other hand, has presented evidence suggesting that Decedent was
the “sole shareholder” of the corporation ‒ the bylaws and Pritchard’s affidavit.
Regarding the affidavit, we agree with Widow’s assertion, presented but not ruled upon
by the trial court, that it was inadmissible hearsay. Meyers v. First Tenn. Bank, N.A.,
503 S.W.3d 365, 379 (Tenn. Ct. App. 2016) (“To consider facts at the summary judgment
stage, they . . . must be admissible in evidence. . . . If they are inadmissible ‘heresay,’ we
cannot consider them on summary judgment”); Logan v. Estate of Cannon, No. E2015-
02254-COA-R3-CV, 2016 WL 5344526, at *4 (Tenn. Ct. App., filed Sept. 23, 2016)
(noting that Tenn. R. Civ. P. 56.06 requires that affidavits “shall set forth such facts as
would be admissible in evidence,” and rejecting inadmissible hearsay from consideration
on summary judgment); Ward v. Glover, 206 S.W.3d 17, 32 (Tenn. Ct. App. 2006)
(“Only admissible evidence can be considered in the summary judgment analysis”).
Accordingly, we are not considering Pritchard’s affidavit in resolving the issue before us.
The corporate bylaws, however, provide, in pertinent part, as follows:
BOARD OF DIRECTORS. The Board of Directors shall consist
of one individual, to-wit, its sole shareholder, James E.
Miller.
* * *
OFFICERS. This Corporation shall have a President and a
Secretary. The Board of Directors, or a duly appointed
officer if authorized by the Board of Directors, may also
appoint a Treasurer, and any number of Vice Presidents,
Assistant Secretaries and/or Assistant Treasurers. The same
individual may simultaneously hold more than one (1) office
in the Corporation, including the offices of President and
Secretary, so long as there is only a sole shareholder. If there
should be more than a sole shareholder, then the same
individual shall not simultaneously hold the offices of
President and Secretary.
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(Paragraph numbering omitted.) At the end of the document, there is a text block
captioned “Certificate of Adoption” which states,
I, James E. Miller, Secretary of Jim Miller Excavating Co.,
Inc., hereby certify that the foregoing Bylaws, consisting of
six (6) articles on ten (10) pages, were adopted by the
Corporation by resolution of the Board of Directors on April
5, 1990.
The signature line designates Decedent as “Secretary.” It is blank.
As can be seen, the unsigned bylaws specify that Decedent is the “sole
shareholder” of the corporation. A trier of fact reasonably could conclude from this
evidence that the issuers of the stock intended him to be its sole owner. In our judgment,
the bylaws are sufficient to create a genuine issue of material fact on the question of
intent. See generally Carter Cnty. Bank v. Craft Indus., Inc., 639 S.W.2d 661, 662
(Tenn. Ct. App. 1982) (“Intent is a question of fact to be determined after consideration
of all the evidence in a full trial”). We hasten to add that we express no opinion herein on
the ultimate question for trial, i.e, what kind of ownership interest the issuers of corporate
stock intended to create, and who owns the stock. We simply hold that summary
judgment is inappropriate under the totality of the evidence presented in this case. In
light of our disposition of this appeal, we respectfully decline Widow’s request to find it
to be frivolous.
IV.
The judgment of the trial court is vacated. This case is remanded for further
proceedings, consistent with this opinion. Costs on appeal are assessed to the appellee,
Vickie C. Miller, in her capacity as personal representative and administrator of the estate
of James E. Miller.
_______________________________
CHARLES D. SUSANO, JR., JUDGE
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