In Re: Estate of John J. Goza v. James M. Wells, III ( 2013 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
August 22, 2013 Session
IN RE: ESTATE OF JOHN J. GOZA v. JAMES M. WELLS, III, ET AL.
Appeal from the Circuit Court for Shelby County
No. CT-00447111 Robert L. Childers, Judge
No. W2012-01745-COA-R3-CV - Filed September 4, 2013
The trial court dismissed this matter for lack of subject matter jurisdiction. We affirm and
grant Appellees’ request for damages for a frivolous appeal.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed and
Remanded
D AVID R. F ARMER, J., delivered the Opinion of the Court, in which H OLLY M. K IRBY, J. and
J. S TEVEN S TAFFORD, J., joined.
Larry E. Parrish, Memphis, Tennessee, for the appellant, Estate of John J. Goza.
Kenneth P. Jones and M. Matthew Thornton, Memphis, Tennessee, for the appellees, James
M. Wells, III, Matthew G. Buyer and SunTrust Bank.
MEMORANDUM OPINION 1
This is the third time the question of the validity of the Helen B. Goza Amended and
Restated Revocable Trust (“the Trust”) has been before this Court. In Morrow v. SunTrust
Bank, No. W2010–01547–COA–R3–CV, 2011 WL 334507 (Tenn. Ct. App. Jan. 31,
1
Rule 10 of the Rules of the Court of Appeals of Tennessee provides:
This Court, with the concurrence of all judges participating in the case, may affirm, reverse
or modify the actions of the trial court by memorandum opinion when a formal opinion
would have no precedential value. When a case is decided by memorandum opinion it shall
be designated “MEMORANDUM OPINION”, shall not be published, and shall not be cited
or relied on for any reason in any unrelated case.
2011)(“Goza I”) and In the Matter of Estate of Goza, 397 S.W.3d 564 (Tenn. Ct. App. 2012),
perm. app. denied. (Tenn. Sept. 20, 2012) (“Goza II”), we held that the revocable trust
established by Helen B. Goza (Ms. Goza) in 1991 and amended in 1999 was valid and
provided for the complete disposition of the residue or assets remaining in the Trust
following the death of Ms. Goza’s mentally disabled son, John J. Goza, who died without
issue in September 2007. The appeal in Goza I arose from a final judgment entered by the
Chancery Court for Shelby County, and the appeal in Goza II arose from a final judgment
entered by the Shelby County Probate Court. In both cases, SunTrust Bank was named as
Defendant. In September 2011, after we issued our opinion in Goza I, and while Goza II was
pending in this Court, Plaintiff/Appellant Estate of John J. Goza (hereinafter, “Appellant”)
filed a complaint against SunTrust Bank and James M. Wells (Mr. Wells) and Matthew
Buyer (Mr. Buyer; collectively, Defendants will be referred to as “SunTrust”), SunTrust
Bank officers, in the Circuit Court for Shelby County. Appellant filed an amended complaint
on October 7, 2011 (hereinafter, “complaint”).2
In December 2011, SunTrust filed a motion to dismiss or, in the alternative, to stay
or for a more definite statement. In its motion, SunTrust asserted, inter alia, that the trial
court lacked subject matter jurisdiction under Tennessee Code Annotated § 35-15-203 where
the case concerned the administration of a trust. It accordingly moved for dismissal pursuant
to Rule 12.02(1) of the Tennessee Rules of Civil Procedure.
Following a hearing on February 17, 2012, the trial court granted SunTrust’s motion
to dismiss for lack of subject matter jurisdiction by order entered June 22, 2012. The trial
court filed an amended order of dismissal on July 16, 2012. In its final order, the trial court
stated that all claims asserted in Appellant’s complaint were premised on the non-existence
of the Trust and “grounded on the contention that the Perpetual Trust was never created and,
therefore, does not exist.” The trial court noted that in order to have subject matter
jurisdiction to adjudicate Appellant’s claim, it must first determine whether the Trust existed.
The trial court held that the question had already been determined by this Court, that the issue
was res judicata, and that it lacked subject matter jurisdiction under Tennessee Code
Annotated § 35-15-203. The trial court accordingly dismissed the matter. The trial court
denied several post-judgment motions, and Appellant filed a notice of appeal to this Court
on August 15, 2012.
Discussion
Appellant raises five issues for our review. Because the trial court dismissed this
2
Appellant also named R. Michael Potter (Mr. Potter) as a Defendant. Mr. Potter was dismissed from
the matter by order entered January 30, 2012.
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matter for lack of subject matter jurisdiction, however, the sole issue now before this Court
is whether the trial court erred by determining that it did not have subject matter jurisdiction.
This issue presents a question of law that we review de novo with no presumption of
correctness. Morgan Keegan & Co., Inc. v. Smythe, 401 S.W.3d 595, 602 (Tenn.
2013)(citations omitted).
We begin our discussion by noting that, as the trial court observed, the claims asserted
in Appellant’s complaint are predicated on the assertion that the Trust did not exist or was
invalid. Further, Appellant does not dispute that if a valid Trust exists, the circuit court
lacked jurisdiction over this matter pursuant to Tennessee Code Annotated § 35-15-203.3
Appellant’s arguments here, as we understand them, are 1) that the trial court erred by
determining, at this stage of the proceedings, the “evidentiary matter” of whether a valid trust
exists notwithstanding this Court’s holdings in Goza I and Goza II; 2) that the trial court
erred by failing to convert SunTrust’s motion to dismiss for lack of subject matter to a motion
for summary judgment where the court considered matters outside the pleadings; and 3) that
the trial court erred by not viewing the facts in a light most favorable to Appellant. Appellant
contends that the trial court erred by considering the “fact” of this Court’s holding in Goza
II when determining whether it had subject matter jurisdiction where the fact was not
contained in its complaint. Appellant also contends that the trial court should have
considered SunTrust’s motion under the standard applicable to a 12.02(6) motion or a motion
for summary judgment. Appellant further asserts that the doctrine of res judicata does not
preclude litigation of the question of whether a valid trust exists in the current action. We
disagree with all of Appellant’s contentions.
This Court has previously examined the significant differences between a Tennessee
Rule of Civil Procedure 12.02(1) motion to dismiss for lack of subject matter jurisdiction and
a Rule 12.02(6) motion to dismiss for failure to state a claim, and has explained in detail that
a trial court considering a motion to dismiss for lack of subject matter jurisdiction must
necessarily resolve some factual matters in order to “determine whether the evidence in favor
3
The section provides:
Chancery courts and other courts of record having probate jurisdiction:
(1) To the exclusion of all other courts, have concurrent jurisdiction over
proceedings in this state brought by a trustee or beneficiary concerning the administration
of a trust; and
(2) Have concurrent jurisdiction with other courts of record in this state over other
proceedings involving a trust.
The statute was amended effective May 9, 2012.
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of finding jurisdiction is sufficient to allow the case to proceed.” Chenault v. Walker, 36
S.W.3d 45, 56 (Tenn. 2001); Wilson v. Sentence Information Services,
M1998-00939-COA-R3-CV, 2001 WL 422966 (Tenn. Ct. App. April 26, 2001). In Wilson,
now Justice Koch thoroughly addressed the arguments that Appellant appears to make in this
case. Finding that analysis to be relevant in all respects to the issue now before us, we find
it appropriate to fully repeat it here:
A threshold question in all cases is whether the court has jurisdiction
over the lawsuit’s subject matter. Because courts cannot act where jurisdiction
is lacking, a trial court has an inescapable duty to determine whether the
dispute is within its subject matter jurisdiction. Edwards v. Hawks, 189 Tenn.
17, 23, 222 S.W.2d 28, 31 (1949); State v. Seagraves, 837 S.W.2d 615, 617
(Tenn. Crim. App. 1992). When a court lacks subject matter jurisdiction over
the case, it must dismiss the case without reaching the merits of the complaint.
Scales v. Winston, 760 S.W.2d 952, 953-54 (Tenn. Ct. App. 1988).
Motions to dismiss under Tenn. R. Civ. P. 12.02(1) differ significantly
from Tenn. R. Civ. P. 1 2.02(6) motions to dismiss for failure to state a claim
upon which relief can be granted. While a motion to dismiss for failure to
state a claim requires the court to reach the complaint’s merits, the other
preliminary motions enumerated in Rule 12 deal with procedural defects apart
from the underlying merits of the complaint. Mortensen v. First Fed. Sav. and
Loan Ass’n., 549 F.2d 884, 891 (3rd Cir. 1977). Because a motion to dismiss
for failure to state a claim adjudicates both the legal and factual merits of a
plaintiff’s suit, courts considering these motions afford plaintiffs the safeguard
of assuming as true all the plaintiff’s factual allegations and drawing all
reasonable inferences in the plaintiff's favor. Doe v. Sundquist, 2 S.W.3d 919,
922 (Tenn. 1999); Harvey v. Ford Motor Credit Co., 8 S.W.3d 273, 275
(Tenn. Ct. App. 1999). If either or both parties submit evidentiary materials
outside the pleadings either in support of or in opposition to a Tenn. R. Civ.
P. 12.02(6) motion and if the trial court decides to consider these materials, the
trial court must convert the motion to dismiss to a motion for summary
judgment, Pacific Eastern Corp. v. Gulf Life Holding Co., 902 S.W.2d at 952,
and the court must notify the parties that it has made the conversion. Teaster
v. Tennessee Dep’t of Corr., No. 01A01-9608-CH-00358, 1998 WL 195963,
at *3-4 (Tenn. Ct .App. Apr. 24, 1998) (No Tenn. R. App. P. 11 application
filed). Once a motion to dismiss is converted to a motion for summary
judgment, the trial court must deny the motion if there exists any dispute about
the material facts of the case. Byrd v. Hall, 847 S.W.2d at 211; Pate v. Service
Merchandise Co., 959 S.W.2d 569, 573 (Tenn. Ct. App.1996).
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However, as the Tennessee Supreme Court has recently pointed out,
motions to dismiss merely on jurisdictional grounds are not converted to
summary judgment motions when material factual disputes arise. Chenault v.
Walker, 36 S.W.3d 45, 55 (Tenn. 2001). Courts faced with a motion to dismiss
for lack of jurisdiction must make some kind of factual resolution allowing the
court either to grant or to deny the motion. In the court’s words, courts
confronted with such motions must “determine whether the evidence in favor
of finding jurisdiction is sufficient to allow the case to proceed.” Chenault v.
Walker, 36 S.W.3d at 56.
In considering the sufficiency of the evidence at the motion to dismiss
stage, the trial court must keep in mind that the plaintiff bears the burden of
proving facts establishing that the court has jurisdiction. When a defendant
has filed affidavits or other competent evidentiary materials challenging the
case’s underlying jurisdictional facts, the plaintiff may not rely on the
complaint but must make a prima facie showing of facts that establish
jurisdiction. To do so, the plaintiff may submit affidavits or other helpful
evidence. Tenn. R. Civ. P. 43.02; Chenault v. Walker, 36 S.W.3d at 56. When
evaluating the case at that stage, the trial court “will take as true the
allegations of the nonmoving party and resolve all factual disputes in its favor
... [without crediting] conclusory allegations or draw[ing] farfetched
inferences.” Chenault v. Walker, 36 S.W.3d at 56. In doing so, however, the
court does “not make any finding as to whether [the plaintiff's] version of
events is, in fact, correct. That will be for a jury to decide if the case goes to
trial.” Chenault v. Walker, 36 S.W.3d at 56.
While Chenault v. Walker sets out most of the rules for deciding
preliminary motions to dismiss, it does not perfectly fit this case. In cases
where the parties have invoked their constitutional right to trial by jury, a trial
court may not, on its own, make factual findings regarding the merits of the
underlying claim. Tenn. R. Civ. P. 39.01. Still, a trial court must decide
certain factual disputes involving merely incidental motions in such cases. By
incidental motions, we mean motions that do not reach a case’s merits.
Preliminary motions to dismiss, other than Tenn. R. Civ. P. 12.02(6) motions,
do not involve the merits of the underlying claim. Parties losing these motions
ordinarily may remedy the defect causing the dismissal of their suit and, as the
poet said, “live to fight another day.” Accordingly, it is well-settled that
preliminary motions, including motions to dismiss for want of jurisdiction, and
the facts underlying such motions, may be decided by the court alone.
Grubart, Inc. v. Great Lakes Dredge & Dock Co., 513 U.S. 527, 537-38, 115
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S.Ct. 1043, 1050 (1995); Cameron v. Children's Hosp. Med. Ctr., 131 F.3d
1167, 1170 (6th Cir.1997); Stewart v. RCA Corp., 790 F.2d 624, 628 (7th
Cir.1986).
On the specific facts of Chenault v. Walker, the Tennessee Supreme
Court declined to settle definitively on the plaintiff's factual version of the
defendant’s conduct at the motion to dismiss stage. Had the court done so, it
would have simultaneously adjudged facts that also went to the merits of the
plaintiff’s underlying claim that the defendant had engaged in conspiracy. For
this reason, the court concluded that “[W]e do not make any finding as to
whether [the plaintiff's] version of events is, in fact, correct. That will be for
a jury to decide....” Chenault v. Walker, 36 S.W.3d at 56.
Wilson v. Sentence Information Services, M1998-00939-COA-R3-CV, 2001 WL 422966, at
*4-5 (Tenn. Ct. App. April 26, 2001)(footnotes omitted)(emphasis added).
As in Wilson, in the current case, the “fact” upon which the trial court based its
determination that it did not have jurisdiction was not intertwined with the factual issues
underlying the merits of Appellant’s claim. Whether or not a trust in fact exists does not
affect Appellant’s claim that Appellees committed a wrongful or tortious act. Rather, that
determination governs only whether Appellant filed its current action in the proper court.
This Court has twice held that the Helen B. Goza Amended and Restated Revocable Trust
is a valid trust that provided for the final disposition of the residue of the Trust for John J.
Goza, who died without issue in September 2007. Estate of Goza, 397 S.W.3d 564 (Tenn.
Ct. App 2012).
We must also disagree with Appellant’s contention that this conclusion arises from
an inappropriate application of the doctrine of res judicata where the parties in Goza I and
Goza II are not in privity. As noted in Goza II:
“ [R]es judicata ” broadly refers to ‘[a]n issue that has been definitively settled
by judicial decision.’ Regions Financial Corp. v. Marsh USA, Inc., 310
S.W.3d 382, 392 (Tenn. Ct. App.2009) (quoting Black’s Law Dictionary
1336–37 (8th ed.2004); see Richardson v. Tenn. Bd. of Dentistry, 913 S.W.2d
446, 459 n. 11 (Tenn. 1995)). It is narrowly defined as a “claim preclusion
doctrine that ‘bars a second suit between the same parties or their privies on
the same cause of action with respect to all issues which were or could have
been raised in the former suit.’” Id. (quoting State ex rel. Cihlar v. Crawford,
39 S.W.3d 172, 178 (Tenn. Ct. App. 2000)). The party asserting that a claim
is precluded carries the burden of demonstrating that 1) a court of competent
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jurisdiction rendered the prior judgment; 2) the same parties or their privies
were involved in both lawsuits; 3) both lawsuits concerned the same cause of
action; and 4) that the underlying judgment was a judgment on the merits. Id.
(citation omitted).
The “broad definition” of res judicata in a civil case also generally
includes collateral estoppel, or issue preclusion. State v. Thompson, 285
S.W.3d 840, 848 (Tenn. 2009). Collateral estoppel “has been described as an
extension of the doctrine of res judicata.” Id. It applies when the issue
involved in the current case already was litigated in an earlier suit between the
parties or their privies, even where the suits concern different causes of action,
if the determination of the issue in the earlier action was necessary to the
judgment. Id. (citations omitted). The Tennessee Supreme Court has “cited the
promotion of finality in the litigation, the conservation of judicial resources,
and the prevention of inconsistent decisions as policy considerations
warranting the application of collateral estoppel in civil litigation.” Id.
(citations omitted). The stated policy of the doctrine is to promote the
“inherent reliability of final judgments.” Id. The party seeking to invoke
collateral estoppel carries the burden of demonstrating that the issue was
determined in a previous action between the parties, that it was necessary to
the judgment in the earlier action, and that a final judgment was rendered in
the prior action. Id. (citations omitted).
“‘Where the litigants have once battled for the court’s decision, they
should neither be required, nor without good reason permitted, to battle for it
again.’ ” Beaty v. McGraw, 15 S.W.3d 819, 824 (Tenn. Ct. App. 1998)(quoting
Zdanok v. Glidden Co., 327 F.2d 944, 953 (2d Cir.1964)). Additionally, “
‘different parties are in privity if they stand in the same relationship to the
subject matter of the litigation.’ ” Trinity Industries, Inc. v. McKinnon Bridge
Co., Inc., 77 S.W.3d 159, 185 (Tenn. Ct. App. 2001). In Aclin v. Speight, we
held that a prior final construction of a Will barred the parties to the earlier
Will construction action, and their privies, from relitigating title to property
devised under the Will. We held that the defendants in that case were
“certainly in privity” where they claimed title to the property through the
original beneficiary under the Will. Aclin v. Speight, 611 S.W.2d 54, 55
(Tenn. App.1980). We noted in Aclin that “the necessary parties then in
existence were parties to the [prior] Will construction case.” We stated that
“[t]he judgment entered therein bound all parties thereto and those in privy....
That construction suit may not now be collaterally attacked.” Id.
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Estate of Goza, 397 S.W.3d at 570-71. In Goza II, we noted that the disputed issue was
identical to the issue presented by Goza I. Id. at 571. We stated, “[t]he only distinction
between the two lawsuits, other than the trial courts in which they were filed, is that Mr.
Morrow filed the first suit in his individual capacity and filed the second suit in his capacity
as Administrator of Mr. Goza’s estate” rather than in his personal capacity. Id. We observed
that Goza I and Goza II involved the identical issue of law, and that the Plaintiffs stood in
the same relationship to the subject matter. Id. Similarly, that the named Plaintiff in the
current action is the Estate rather than the administrator on behalf of the Estate is immaterial
where both stand in the same relationship to the subject matter. The issue upon which the
trial court determined that it did not have subject matter jurisdiction in this case, namely, the
existence of a valid trust, has been decided twice by this Court and cannot be collaterally
challenged here. Accordingly, the trial court did not err by dismissing the matter for lack of
subject matter jurisdiction pursuant to Tennessee Code Annotated § 35-15-203.
We turn next to SunTrust’s prayer for an award of reasonable attorneys’ fees and costs
pursuant to Tennessee Code Annotated § 27-1-122 as damages for a frivolous appeal.
“Successful litigants should not have to bear the expense and vexation of a groundless
appeals.” Davis v. Gulf Ins. Group, 546 S.W.2d 583, 586 (Tenn. 1977). Nor should this
Court.
We neither interpret nor apply Tennessee Code Annotated § 27-1-122 so strictly as
“to discourage legitimate appeals.” Id. However, in light of the foregoing analysis provided
by this court over a decade ago in Wilson; the considerable body of case law addressing the
courts’ obligation to determine whether it has jurisdiction as a fundamental threshold matter;
the undisputed statutory provisions that the existence of a valid trust would preclude
jurisdiction by the circuit court in this matter; and, most significantly, this Court’s holdings
in Goza I and Goza II, we agree with SunTrust that this appeal had no reasonable chance of
success. Appellant has simply attempted to re-litigate the issue of whether the Trust is valid
despite holdings in the probate and chancery courts, two determinations by this Court, and
the supreme court’s denial of Appellant’s application to appeal to that Court. Appellant has
thereby depleted the funds held in the Trust for the benefit of the mentally disabled, and
caused needless expense of resources. The record of the proceedings in the trial court in the
current case alone is comprised of a ten-volume technical record and four volumes of
exhibits. The question raised by this appeal was settled with finality by Goza I in January
2011. We accordingly find this is an appropriate case for an award of damages for a
frivolous appeal. SunTrust is awarded reasonable attorneys’ fees and costs pursuant to
Tennessee Code Annotated § 27-1-122.
Holding
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In light of the foregoing, the judgment of the trial court is affirmed. Appellees
SunTrust Bank, Matthew Buyer, and James M. Wells, III, are awarded damages for a
frivolous appeal pursuant to Tennessee Code Annotated § 27-1-122. Costs on appeal are
taxed to the Appellant, Estate of John J. Goza, and its surety, for which execution may issue
if necessary. This matter is remanded to the trial court to assess damages pursuant to section
27-1-122 and for the collection of costs.
_________________________________
DAVID R. FARMER, JUDGE
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