Lani Thomas Arnold and James Davis, Administrator of the Estate of Mary Reeves Davis v. W. Terry Davis ( 2004 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
March 16, 2004 Session
LANI THOMAS ARNOLD and AMES DAVIS, Administrator of the Estate
of Mary Reeves Davis v. W. TERRY DAVIS
A Direct Appeal from the Probate Court for Davidson County
No. 00P537 The Honorable Frank G. Clement, Jr., Judge
No. M2003-00620-COA-R3-CV - Filed June 17, 2004
This case involves the interpretation of certain provisions of a Trust Instrument. The trial
court found a latent ambiguity in the Instrument, allowed extrinsic evidence, and granted Appellee's
Motion for Summary Judgment. Appellant appeals. We affirm.
Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Probate Court Affirmed
W. FRANK CRAWFORD , P.J., W.S., delivered the opinion of the court, in which DAVID R. FARMER ,
J. and HOLLY M. KIRBY , J., joined.
Gregory H. Oakley and Daniel W. Small of Nashville for Appellant, W. Terry Davis
Ames Davis and Sally B. Buntin of Nashville for Appellees, Lani Thomas Arnold and Ames Davis,
Administrator of the Estate of Mary Reeves Davis
R. Horton Frank III of Nashville for Appellee, Lani Thomas Arnold
OPINION
This case involves the interpretation of certain provisions of a trust instrument. The trial
court found a latent ambiguity in the instrument, allowed extrinsic evidence, and granted Appellee’s
Motion for Summary Judgment. Appellant appeals. We affirm but with the added provision that
the paragraph of the trust instrument, under which Appellant claims, is a testamentary disposition,
which fails to comport with the requirements of T.C.A. § 32-1-104 (2001).
Mary Reeves Davis (“Mrs. Davis,” or “Decedent”) is the widow of the late country music
star, Jim Reeves. W. Terry Davis (“Mr. Davis,” or “Appellant”) is Mrs. Davis’s second husband
and, at the time of her death, they had been married for some twenty-five years.
On June 24, 1996, Mr. Davis, as holder of a Durable Power of Attorney executed by Mrs.
Davis on May 25, 1996, negotiated an agreement under which Mrs. Davis sold all of her real
property for $3.8 million to United Shows of America (“United Shows”) and sold all of her property
related to Jim Reeves Enterprises (which she owned as sole legatee of her late husband, Jim Reeves)
for $3.5 million to United Shows. Concerning where the monies from the United Shows sale would
go, Mr. Davis entered into an agreement (the “Agreement”) with W.D. White, the brother of Mrs.
Davis.1 This Agreement, dated June 28, 1996, provides, in relevant part, as follows:
1. Terry Davis agrees to establish an Irrevocable Trust to provide for
the immediate and life-long personal and health-care needs of Mary
Reeves Davis.
* * *
4. The primary purpose of the Trust shall be to provide for the
immediate, and life-long personal needs of Mary Reeves Davis, at a
standard commensurate with the life-style she has been accustomed
to enjoying; and to provide for her health-care as medically indicated.
5. A secondary purpose of the Trust shall be to perpetuate the
memory of the late Jim Reeves, by providing for the maintenance of
the Jim Reeves burial site and monument near Carthage, Panola
County, Texas.
* * *
7. The monies for establishing the Trust shall be fifty percent (50%)
of the funds paid by United Shows of America...for the properties
held by Mary Reeves Davis and/or Mary Reeves Davis and Terry
Davis, in the amount of approximately 7.3 million dollars
($7,300,000.00). These funds shall be paid directly to the Trust by
the purchasers of these properties.
8. In the event that Terry Davis is living at the time of Mary Reeves
Davis’ death, the Trust shall be closed and the assets transferred to
Mary Reeves Davis’ husband.
On July 11, 1996, Mrs. Davis signed a document titled “Trust Indenture Mary Reeves
Davis Inter-Vivos Trust” (the “Trust”).2 The Trust was prepared by Carrol D. Kilgore, the
attorney who represented Mrs. Davis and provides, in pertinent part, as follows:
III.
1
Mrs. Davis is not a party to this Agreement. Mr. Davis signed the Agreement individually and not on behalf
of Mrs. Davis.
2
Prior to the July 11, 1996 Trust, Mrs. Davis executed another trust on April 25, 1996. This “first trust” was
revoked on May 25, 1996.
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* * *
(2) After escrowing funds for taxes as aforesaid, the Trustee shall
segregate and hold in trust under this instrument my half of the
proceeds of each such payment as contemplated by The Agreement,3
and then pay to my husband, W. TERRY DAVIS, his half if it [sic].4
* * *
IV.
This Trust shall terminate upon my death and it shall
thereupon be the duty of the Trustee, subject to the payment of any
fiduciary income taxes that may be an obligation of the Trust, to pay
all trust corpus and accrued income to the administrator or executor
of my estate subject to the provisions hereinafter contained that shall
be applicable in the event that I shall survive my husband, W.
TERRY DAVIS. The disposition of the assets in my estate shall be
as determined by the Probate Court in accordance with any valid wills
and codicils I may heretofore or hereafter have executed, debt
obligation instruments and any other valid legal instruments
heretofore or hereafter executed by me.
V.
In the event I shall predecease my husband, W. TERRY
DAVIS, the Trustee, subject to such fiduciary tax liabilities as may
be imposed upon it may make distribution to W. TERRY DAVIS in
3
The Agreement refers to that entered between Mr. Davis and Mr. W hite, see supra.
4
In the preceding drafts of the Trust Instrument, Article III ¶2 read as follows:
(2) After escrowing funds for taxes as aforesaid, the Trustee shall segregate and
hold in trust under this instrument my half of the proceeds of each such payment as
contemplated by The Agreement. The Trustee shall then pay to my husband, W .
TERRY DAVIS, his half if it determines that The Agreement together with my
power of attorney granted him on May 25, 1996, vests him with legal entitlement
to such share. If it determines that such does not vest him with such ownership then
I now
AFFIRM /DO NOT AFFIRM ______________________________
[Delete One] MARY REEVES DAVIS
such gift. If I affirm such gift, my Trustee shall honor it upon receipt of a written
certification by my physician, RICHARD M ARGOLIN, M .D., of his conclusion
, on the basis of appropriate testing, that I have the present mental competence to
make such gift in view of (a) my long and happy marriage to the donee and (b) the
amount of the gift.
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accordance with the provisions of paragraph 8 of The Agreement,
subject to the overriding instructions of Article III, ¶2 hereof.5 If
payment directly to my husband be not authorized thereby, such
moneys shall be paid into my estate in accordance with Article IV
hereof.6
On August 28, 1996, Lani Thomas Arnold (“Arnold,” or “Appellee”), a niece of Jim
Reeves, filed a “Petition for Appointment of Conservator and Order to Show Cause,” in which
Arnold alleged that Mrs. Davis was incompetent and sought to enjoin the sale of all of Mrs.
Davis’s assets to United Shows under the agreement negotiated by Mr. Davis between Mrs.
Davis and United Shows.
On December 20, 1996, the trial court appointed a guardian ad litem for Mrs. Davis. On
January 14, 1997, the guardian ad litem filed a “Preliminary Report,” in which he recommended
that a conservator be appointed for Mrs. Davis based upon her present mental and physical
impairments.
On January 17, 1997, Arnold filed her “First Amended Petition for Appointment of
Conservator and Order to Show Cause” (the “Amended Petition”), naming Mr. Davis, Mrs.
Davis and United Shows as Respondents.7 The Amended Petition alleged that Mrs. Davis was
incompetent to establish the Trust, and again alleged that the sale of her assets to United Shows
was not in her best interest.8 By Order of January 23, 1997, Mrs. Davis’s brother, W.D. White,
was appointed temporary conservator. On June 28, 1997, W.D. White died. Upon his “Motion
to Intervene and to be Appointed Conservator,” the trial court, on August 25, 1997, appointed
Mrs. Davis’s nephew, the Reverend Dr. William H. White of Dallas, Texas, to act as Conservator
“of the person and the estate of Mary Reeves Davis.” The court instructed Mr. White to
investigate the power of attorney granted Mr. Davis, the sale of Mrs. Davis’s assets to United
Shows, and the July 11, 1996 Trust executed by Mrs. Davis.
Based, inter alia, upon the report of the Conservator, the trial court entered an Order on
November 5, 1997, which approved the sale of Mrs. Davis’s assets to United Shows but reserved
any ruling on the validity of the Trust (except to direct the trustee under the Trust to receive
payments made by United Shows for the assets and to pay Mr. Davis $20,000 per month out of
the trust assets pending further proceedings).
5
Although the “overriding language,” as set out supra at note 4 was deleted from the final draft of the trust
instrument, this reference to that “overriding language” was left in here at Article V.
6
By amendment dated July 25, 1996, Mrs. Davis’s CPA, Charles Young, was substituted for Mr. Davis as
trustee of the Trust.
7
United Shows was dismissed from this suit by Order of January 15, 1998.
8
Arnold was allowed to file a “Second Amended and Supplemental Petition for Appointment of Conservator
and to Set Aside Transfer of Property” on October 5, 2001. This second amended petition reflected events that had taken
place since the first Amended Petition was filed.
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Mrs. Davis died on November 11, 1999. On January 14, 2000, the trial court entered its
“Order Permitting Interpleader of Trust Funds,” which directed the trustee of the Trust to pay
into the court all funds held under the Trust, and directed United Shows to make all further
payments in connection with the purchase of Mrs. Davis’s assets to the court, and directed that
the claimants to the trust property must prosecute any claims relative to the Trust, including any
claims as to the validity of the Trust, in the proceeding initiated by Arnold.
On August 8, 2000, Ames Davis (“Administrator”), as the Court-Appointed
Administrator for the Estate of Mary Reeves Davis (the “Estate”), filed an Intervening Petition,
asking the probate court to rule that the validity of the Trust is moot because, under the terms of
the Trust, the corpus of the Trust passed to the Estate upon Mrs. Davis’s death.
On August 16, 2001, Ames Davis filed “Administrator’s Motion for Summary Judgment”
(the “Motion for Summary Judgment”). The Motion for Summary Judgment cited Article IV of
the Trust (see supra) for the proposition that, since Mrs. Davis did not survive her husband, “any
provisions which might govern had she survived W. Terry Davis have been pretermitted and
rendered moot, and under Article IV, the Administrator is vested with the sole title to the trust
assets.” Ames Davis also filed a “Rule 56.03 Statement of Undisputed Fact in Support of
Administrator’s Motion for Summary Judgment”:
Pursuant to Rule 56.03 of the Tennessee Rules of Civil
Procedure, Ames Davis, Administrator C.T.A. of the Estate of
Mary Reeves Davis (the “Administrator”) specifies the following
statement of material facts as to which the Administrator contends,
solely for purposes of his Motion for Summary Judgment, that
there is no genuine issue of disputed fact. The Administrator
reserves the right, in the event the Motion for Summary Judgment
is denied, to object at trial to admission of extrinsic evidence
relative to the intention of Mary Reeves Davis, as clearly expressed
in Article IV of the Trust Instrument which she executed dated July
11, 1996, on the grounds that such evidence violates the parole
evidence rule. The Administrator is entitled to summary judgment
regardless of whether such extrinsic evidence is admitted. Such
facts established by such extrinsic evidence are cited for the sole
purpose of demonstrating that even if such evidence were
admissible, the facts which they would indisputably establish
entitle the Administrator to summary judgment as a matter of law.
1. On or about June 23, 1996, W. Terry Davis, as holder of a
Durable Power of Attorney executed by Mary Reeves Davis,
negotiated agreements under which Mary Reeves Davis sold (the
“Sale”) all of her real property for $3.8 million to United Shows of
America and sold all of her property related to Jim Reeves
Enterprises (which she owned as sole legatee of her late husband,
Jim Reeves) for $3.5 million to United Shows and an agreement of
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United Shows to pay 5% of Jim Reeves RCA royalties jointly to
Mary Reeves Davis and her husband, W. Terry Davis. Article II of
the Trust Indenture dated July 11, 1996 (the “Trust Indenture”), a
copy of which is Exhibit 1 to the Deposition of Carrol D. Kilgore
taken May 16-17, 2001.
2. Under Article II of a Trust Indenture executed by Mary Reeves
Davis, dated July 11, 1996, Mary Reeves Davis purportedly
assigned all her contractual rights to receive payments from United
Shows under the Sale to her trustee under the Trust Indenture.
Trust Indenture, Article II.
3. After a Conservator for Mary Reeves Davis was appointed, the
Sale was approved by Order of this Court entered November 4,
1997. Order dated November 4, 1997, in Conservatorship
proceedings.
4. The obligations of United Shows’ representing the proceeds of
the Sale, if properly a part of the Trust corpus, are in the form of
United Shows’ promissory Notes in the original principal amount
of $7.3 million, which call for periodic payments from United
Shows; and Mary Reeves Davis’ contractual right to receive half of
the 5% royalties pertaining to songs of the late Jim Reeves. Trust
Indenture, Article II; Order of this Court entered November 4,
1997, in Conservatorship Proceedings.
5. Paragraph IV of the Trust Indenture dated July 11, 1996,
provides as follows:
This trust shall terminate upon my death and it shall
thereupon be the duty of the Trustee, subject to the
payment of any fiduciary income taxes that may be
an obligation of the Trust, to pay all trust corpus and
accrued income to the administrator or executor of
my estate subject to the provisions hereinafter
contained that shall be applicable in the event that I
shall survive my husband, W. TERRY DAVIS. The
disposition of the assets in my estate shall be as
determined by the Probate Court in accordance with
any valid wills and codicils I may heretofore or
hereafter have executed, debt obligation instruments
and any other valid legal instruments heretofore or
hereafter executed by me.
Trust Indenture, Article IV.
-6-
6. Mary Reeves Davis did not survive her husband, W. Terry
Davis.
Pleadings.
7. At page 40 of his deposition, Carrol D. Kilgore, who
represented Mary Reeves Davis in the preparation and execution of
the Trust Instrument dated July 11, 1996, testified as follows:
Q. Mr. Kilgore, you have identified as Exhibit 1
this trust instrument dated July 11, 1996.
A. That’s right.
Q. Paragraph Roman numeral IV on Page 4 of this
agreement specifies that the trust shall terminate
upon the death of Mary Reeves Davis. And it says
that it is the duty of the trustee to pay all trust
corpus and accrued income to the administrator or
executor of my estate subject to the provisions
hereinafter contained that shall be applicable in the
event that I shall survive my husband, W. Terry
Davis, period, close quote.
Do you see that?
A. Yes.
Q. Did she understand that at her death if her
husband survived her that the corpus of this trust
would be paid to her estate under this paragraph?
A. Oh, I think so. I mean, that’s the way we
discussed it previously, that she had a will which
was to control upon her death.
Deposition of Carrol Kilgore, page 40.
8. Article V of the Trust Indenture dated July 11, 1996, provides
as follows:
In the event I shall predecease my husband, W.
TERRY DAVIS, the Trustee, subject to such
fiduciary tax liabilities as may be imposed upon it
may make distribution to W. Terry Davis in
accordance with the provisions of paragraph 8 of
The Agreement, subject to the overriding
instructions of Article III, ¶ 2 hereof. If payment
directly to my husband be no authorized thereby,
such moneys shall be paid into my estate in
accordance with Article IV hereof.
-7-
Trust Indenture, Article V. (The italics are supplied in the Trust
itself.)
9. The Agreement is defined in Article I of the Trust Instrument as
a contract between W. Terry Davis and W. D. White, a copy of
which is attached as Exhibit D to the Trust Instrument. Trust
Indenture, Article I and Exhibit D to the Trust Indenture.
10. Mary Reeves Davis was not a party to The Agreement. Exhibit
D to the Trust Indenture.
11. Paragraph 2 of The Agreement provides as follows:
Terry Davis agrees to establish an irrevocable Trust
to provide for the immediate and life-long personal
and health-care needs of Mary Reeves Davis.
Exhibit D to the Trust Indenture.
12. Paragraph 8 of The Agreement provides as follows:
In the event that Terry Davis is living at the time of
Mary Reeves Davis’ death, the Trust shall be closed
and the assets transferred to Mary Reeves Davis’
husband.
Exhibit D to the Trust Indenture.
13. Upon the death of Mary Reeves Davis, the Trustee did not
make any distribution to W. Terry Davis. Pleadings.
14. Prior to preparing the Trust Instrument, Mr. Kilgore received a
faxed copy of The Agreement, Paragraph 7 of which provided as
follows:
The monies for establishing the Trust [by W. Terry
Davis] shall be fifty percent (50%) of the funds paid
by United Shows of America . . . for the properties
held by Mary Reeves Davis and/or Mary Reeves
Davis and Terry Davis, in the amount of
approximately 7.3 million dollars ($7,300,000.00).
These funds shall be paid directly to the Trust by the
purchaser of these properties.
-8-
Kilgore deposition, page 69, line 17 through page 70, line 2;
Exhibit 22; and Exhibit D to Trust Indenture.
15. The Agreement was not executed by Mary Reeves Davis.
Exhibit D to Trust Indenture.
16. Mr. Kilgore was not advised that either W. Terry Davis or Dr.
White (who later became her Conservator) had power to act on her
behalf in connection with The Agreement. Kilgore deposition,
page 69, line 17 through page 71, line 21.
17. On July 8, 1996, after he had received a copy of The
Agreement, Mr. Kilgore went to visit Mary Reeves Davis, who was
confined in a locked ward at Stones River Nursing Home, in order
to explain The Agreement to her and seek her instructions. Kilgore
deposition, page 71 line 22 through page 73, line 8; page 111, lines
5 through 11.
18. While Mary Reeves Davis did not appear to Mr. Kilgore to be
surprised by the provisions of The Agreement, Mr. Kilgore did not
know who (if anyone) had previously explained it to her. Kilgore
deposition, page 74, lines 1 through 15.
19. Mr. Kilgore was concerned that if W. Terry Davis got half of
the payments directly from United Shows, he might spend his half
without paying the income taxes due thereon. Kilgore deposition,
page 76 lines 1 through 6.
20. Mr. Kilgore testified as follows about his conversation with
Mary Reeves Davis at the nursing home on July 8, 1996,
concerning the purported gift of half the payments received from
United Shows to W. Terry Davis:
I remember I told her that I could not safely protect
her half except by paying all the money into trust to
secure tax payment because if Terry – something
happened to Terry, she could be stuck with the
whole tax bill and would not have sufficient assets
to pay it. So instead of putting half of it into trust,
all of it had to be paid in initially until the tax
money was secured . . . and she agreed to that.
Kilgore deposition, page 75, lines 13 through 24.
-9-
21. While The Agreement seemed to suggest that Mary Reeves
Davis had made a gift to W. Terry Davis, Mr. Kilgore was never
sure whether any such gift had been made. Exhibit 6 to Trust
Indenture, paragraph 7; Kilgore deposition, page 185, lines 10
through 13.
22. Mr. Kilgore testified as follows at his deposition:
Q. What are the uncertainties with which you were
uncomfortable on July 10 [the day before the Trust
Instrument was executed], Mr. Kilgore?
A. Well, the uncertainties was [sic] that this was a
monstrous gift from her to her husband. It was
entirely contrary to her prior actions. And I had no
assurance of her competence and I felt obligated to
try to find out if she was competent. And if she
wasn’t, if there was any doubt about it, to safeguard
against it.
Kilgore deposition, page 118, line 14 through page 120, line 23.
23. On July 10, Mr. Kilgore inquired of Mary Reeves Davis’
psychiatrist, Dr. Margolin, whether he could give an opinion as to
Mary Reeves Davis’ competence and was advised that Dr.
Margolin would not give an opinion as to her competence. Kilgore
deposition, page 118, line 14 through page 120, line 23; Exhibit 26.
24. Mr. Kilgore inserted the following provision (the “Deleted
Provision”) in Article III of the Trust Instrument as it was
originally prepared:
(2) After escrowing funds for taxes as aforesaid, the Trustee shall
segregate and hold in trust under this instrument my half of the
proceeds of each such payment as contemplated by The Agreement.
The Trustee shall then pay to my husband, W. Terry Davis, his
half if it determines that The Agreement together with my power
of attorney granted to him on May 25, 1996, vests him with legal
entitlement to such share. If it determines that such does not vest
him with such ownership then I now
AFFIRM/DO NOT AFFIRM ___________________________
[Delete One] MARY REEVES DAVIS
such gift. If I affirm such gift, my Trustee shall honor it upon
receipt of written certification by my physician, RICHARD
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MARGOLIN, M.D., of his conclusion, on the basis of appropriate
testing, that I have the present mental competence to make such
gift in view of (a) my long and happy marriage and (b) the amount
of the gift.
Kilgore deposition, page 128, line 1 through page 129, line 18.
25. Mr. Kilgore explained the Deleted Provision as follows:
... It made the trustee make the determination of whether
the so-called, quote, the agreement, vested any ownership in Terry.
And then if it didn’t, then it had the place for Mary to reaffirm the
gift if she wanted to.
Q. Was part of that driven by the fact that Mary was not even a
party to the agreement between Terry and W. D. White?
A. It was mainly driven by the fact that it was obviously void on
its face as a gift because Terry was acting under a power of
attorney and could not use it to make a gift to himself and I so
stated in the conference there. I said, “Any trustee who sees this
will conclude that there is no valid gift to you.”
Q. What was said next in response to those comments?
A. Well, Terry expressed concern about getting Dr. Margolin in on
it.
Q. Why was he concerned about getting Dr. Margolin?
A. I don’t now why he was concerned. He just didn’t – he just
objected to that and Mr. Branstetter expressed agreement with him
about the difficulty of getting a psychiatrist’s opinion.
Q. Did Mary express an opinion one way or the other?
A. She didn’t express. She just sort of indicated agreement after
Terry kept insisting and I sort of looked over at her and I said,
“Well, I’ll take it out if it’s okay.” Something like that. And she
gave a very slight nod is the most I can say. She pretty much
didn’t show much life during the whole proceedings except that
she became alert on the durable power of attorney and I don’t recall
her saying anything except to chatter with the witnesses who came
in, you know.
* * *
Q. Did you change the instrument?
A. Yes, I took out everything from beginning with the phrase “the
trustee shall then pay to my husband” and all the rest of that
paragraph I lined out, according to the best of my recollection.
-11-
And then it was retyped. I mean reprinted, of course, from the
computer. Just part was deleted.
Kilgore deposition, page 129, line 14 through page 130, line 4;
page 132, lines 3-9.
26. At his deposition, Mr. Kilgore testified as follows:
Q. ... I’m showing you Exhibit 1 now, which is the trust
indenture bearing the date which was actually executed. As you
understood it, was the purpose of this instrument to accomplish any
gift from Mary Reeves Davis to Terry Davis?
A. No. Well, it was initially, as I initially drafted it, it was to give
her the opportunity if she wished –
Q. Right.
A. –to make or to decline to make such a gift.
Q. Well, in point of fact, let’s look –
A. Now, as it’s amended, it was not for the purpose of vesting any
rights in him whatever.
Kilgore deposition, page 183, lines 1 - 14.
27. At his deposition, Mr. Kilgore testified as follows:
Q. Now Paragraph V [of the Trust Instrument] talks about money
that should be distributed to W. Terry – may be distributed to
W. Terry Davis. Is that – what money is that?
A. Well, that was originally written to sort of – with reference to
the language which called for a psychiatrist’s opinion.
Q. So, in other words –
A. Said shall be subject to the overriding instructions of Article
III, Paragraph (2). And when this was written, Article III,
Paragraph (2), had the provision in it calling for the trustee to pass
judgment on whether Davis, Terry Davis had already achieved
ownership; and if not, then this alternative of Mary now approving
a gift to Terry.
Q. Okay.
A. And now it just says – it doesn’t make a lot of sense as it’s left
now but I didn’t go back and revisit this.
Q. Well, but –
A. But the overriding instructions of Article III, Paragraph (2), are
to escrow funds first for taxes. But it does speak, instead of the
entire corpus, it speaks of individual payments. That is, it was
anticipated that United Shows would make individual payments
pursuant to these various contracts and this was to be immediately
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split after the trustee determined how much money should be set
aside for taxes.
Q. And was it your understanding that at Mary Reeves Davis’
death that arrangement was to terminate and it was all to be paid
over to her executor?
A. Well, I think I understood that upon her death if the trustee had
any money in hand from an undistributed payment that Terry – the
half that wasn’t Mary’s could be paid over to Terry but then
everything would be transferred to her executor.
Q. Now –
A. Of course, I really didn’t know in this whether – you know, I
assumed this was adequate to assign the note and the contracts –
Q. To the trust?
A. – to the trustee, assuming there was no prior assignment to
Terry.
Q. Now, was it the purpose of this trust indenture as you
understood it to implement the entire agreement [The Agreement]
which is Exhibit D to the agreement?
A. Absolutely not.
Q. So does this language here mean in Paragraph 1 [of The
Agreement] where it says Purpose? Does it – did you mean – why
doesn’t that mean to implement the entire agreement?
A. Because it says to implement as herein provided the agreement
made between Davis and White. And so if it’s herein provided to
implement that agreement, it’s to be implemented. If it’s not so
provided herein, then the agreement has no effect.
Kilgore deposition, page 189, line 4 through page 191, line 9.
On July 8, 2002, Mr. Davis filed a “Response to Administrator’s Statement of
Undisputed Facts and W. Terry Davis’ Statement of Facts in Opposition to Administrator’s
Motion for Summary Judgment” (the “Response”). The Response admits all of the
Administrator’s facts for purposes of summary judgment, except (1) Mr. Davis disputes the
admissibility of the deposition testimony of Carrol Kilgore, Mrs. Davis’s attorney who prepared
the Trust; (2) Mr. Davis denies that Mrs. Davis was not a party to a document exhibited to the
Trust and referred to therein as “The Agreement.” Mr. Davis argued that Mrs. Davis became a
party to the Agreement because she signed the Trust to which the Agreement was exhibited. In
addition to his Response, Mr. Davis submitted his own Affidavit in opposition to the
Administrator’s Motion for Summary Judgment.
Following a hearing, the trial court entered its “Memorandum Opinion” on January 22,
2003, which granted the Administrator’s Motion for Summary Judgment. Mr. Davis appeals
from the Order granting Ames Davis’s Motion for Summary Judgment and raises one issue for
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review as stated in his brief: Whether the trial court improperly interpreted the Decedent’s Trust
Instrument and thus erred by granting the Administrator’s Motion for Summary Judgment.
Resolution of the issue in this case was determined as solely dependent upon the
construction of the provisions of the Trust and we will first review the case on that premise. The
language used in a written instrument must be taken and understood in its plain, ordinary, and
popular sense. Bob Pearsall Motors, Inc. v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578
(Tenn.1975). In construing written instruments, the words expressing the parties’ intentions
should be given the usual, natural, and ordinary meaning. Ballard v. North American Life &
Cas. Co., 667 S.W.2d 79 (Tenn.Ct.App.1983). If the language of a written instrument is
unambiguous, the Court must interpret it as written rather than according to the unexpressed
intention of one of the parties. Sutton v. First Nat. Bank of Crossville, 620 S.W.2d 526
(Tenn.Ct.App.1981). A written instrument is not ambiguous merely because the parties have
different interpretations of the instrument’s various provisions, Cookeville Gynecology &
Obstetrics, P.C. v. Southeastern Data Sys., Inc., 884 S.W.2d at 462 (citing Oman Constr. Co. v.
Tennessee Valley Auth., 486 F. Supp. 375, 382 (M.D.Tenn.1979)), nor can this Court create an
ambiguity where none exists in the instrument. Cookeville P.C., 884 S.W.2d at 462 (citing
Edwards v. Travelers Indem. Co., 201 Tenn. 435, 300 S.W.2d 615, 617-18 (1957)). The court
should first seek the parties’ intention by examining the words in the written instrument,
Hutchison v. Board, 250 S.W.2d 82, 84 (Tenn. 1952), and by considering these words in the
context of the instrument as a whole. Collins v. Smithson, 585 S.W.2d 598, 603 (Tenn. 1979);
Barber v. Westmoreland, 601 S.W.2d 712, 714 (Tenn. Ct. App. 1980). Courts customarily
decline to consider parol evidence that adds to, varies, or otherwise contradicts the language of
the instrument. Stickley v. Carmichael, 850 S.W.2d 127, 132 (Tenn. 1992). However, parole
evidence may be admissible to remove a latent ambiguity. Stickley v. Carmichael, 850 S.W.2d
at 132; Estate of Burchfiel v. First United Methodist Church, 933 S.W.2d 481, 482 (Tenn. Ct.
App. 1996). A latent ambiguity is found where:
...the equivocality of expression or obscurity of intention does not
arise from the words themselves, but from the ambiguous state of
extrinsic circumstances to which the words of the instrument refer,
and which is susceptible of explanation by the mere development of
extraneous facts, without altering or adding to the written language,
or requiring more to be understood thereby than will fairly comport
with the ordinary or legal sense of the words and phrases made use of.
Teague v. Sower, 114 S.W. 484, 488 (Tenn. 1908) (citing Weatherhead v. Sewell, 28 Tenn. (9
Humph.) at 295.
On the other hand, parole evidence is not admissible to explain a patent ambiguity
contained within the instrument. Estate of Burchfiel v. First United Methodist Church, 933
S.W.2d at 482. A patent ambiguity is defined as:
one produced by the uncertainty, contradictoriness, or deficiency of
the language of an instrument, so that no discovery of facts, or proof
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of declarations, can restore the doubtful or smothered sense without
adding ideas which the actual words will not themselves sustain.
Teague v. Sower, 114 S.W. 484 at 488 (citing Weatherhead v. Sewell, 28 Tenn. (9 Humph.) at
295.
In other words, a patent ambiguity is one which appears on the face of the instrument;
while a latent ambiguity is one “...where the instrument is unambiguous on its face, but becomes
open to more than one interpretation when applied to the factual circumstances.” 76 Am. Jur. 2d
Trusts § 694 (2003).
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. 56.04. The party moving for summary judgment bears the
burden of demonstrating that no genuine issue of material fact exists. See Bain v. Wells, 936
S.W.2d 618, 622 (Tenn.1997). 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. The question of whether
a trust document is ambiguous is a question of law.” 76 Am. Jur. 2d Trusts § 686 (2003). The
interpretation of a written instrument is also a matter of law and not of fact. See Rainey v.
Stansell, 836 S.W.2d 117 (Tenn.Ct.App.1992). Summary judgment is a preferred vehicle for
disposing of purely legal issues. See Byrd v. Hall, 847 S.W.2d 208 (Tenn.1993); Bellamy v.
Federal Express Corp., 749 S.W.2d 31 (Tenn.1988). Since the question of ambiguity and the
construction of a written instrument both involve legal issues, these matter are particularly suited
to disposition by summary judgment. See, e.g., Browder v. Logistics Management, Inc., 1996
WL 181435, 1996 LEXIS Tenn.App. 227 (Tenn.Ct.App.1996); see also Rainey, at 119. Since
only questions of law are involved here, there is no presumption of correctness regarding the trial
court's grant of summary judgment. Bain at 622. Therefore, our review of the trial court's grant
of summary judgment is de novo on the record before this Court. Warren v. Estate of Kirk, 954
S.W.2d 722, 723 (Tenn.1997).
We have reviewed the Trust in its entirety and we find that the trial court was correct in
finding a latent ambiguity as to whether Mrs. Davis intended that Mr. Davis receive the assets
outright if he survived Mrs. Davis, or whether he was to receive them in a fiduciary capacity for
Mrs. Davis’s Estate, or whether the assets passed to the Estate at all.9 Because we
9
The trial court gives a thorough analysis of this ambiguity in its January 22, 2003 Memorandum Opinion, to
wit:
...Article I of the Trust states that Mary Reeves Davis’ purpose in creating the Trust
is to provide for her living expenses and medical care and treatment during her life
and to provide for the disposition of her property that is to be held in trust upon its
termination. Article I also provides that a purpose of the trust is to “implement, as
herein provided, the Agreement.” Additionally, Article III provides that the trustee
should perpetuate the memory of Jim Reeves pursuant to Paragraph 5 of the
(continued...)
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9
(...continued)
Agreement which provides that Jim Reeves’ grave site should be maintained and
Article III (1) provides that another purpose of the trust is to provide for the proper
payment of taxes on the monies received from United Shows. The Agreement
further provides that the “primary purpose” of the Trust is to provide for Mary
Reeves Davis’ personal needs and health care.
W hile there are numerous stated purposes in the Agreement, the only
purpose stated both in the title and again in the body of the Agreement and
additionally stated to be the primary purpose is to provide for the personal needs
and health care of Mrs. Davis. Moreover, it is the logical purpose in that her health
was failing at the time the Trust and Agreement were created. Further, the
Agreement was an agreement between her brother and her husband (she was not a
party to the Agreement), each of whom were purportedly acting to protect her and
care for her as her health declined. Moreover, while her brother and husband may
have been authorized by the respective powers of attorney to act for her and in her
best interest to see that she was provided for during her life, neither had apparent
authority to act beyond that point. Particularly, neither had authority to dispose of
her estate as they might choose.
Article IV of the Trust provides that the trust shall terminate upon the
death of Mary Reeves Davis. Upon the termination of the trust, the Trustee is
directed to pay the trust’s income and corpus to the administrator or executor
subject to two conditions: first, the income tax obligations of the trust must be paid
and, second, payment of the trust corpus and accrued income is “subject to the
provisions hereinafter contained.....” Some of the “provisions hereinafter
contained” are found in Article V.
Article V provides that if Mary Reeves Davis predeceases her husband
(which she did) the Trustee may make distribution to Terry Davis, subject to, tax
liabilities being satisfied, in accordance with paragraph 8 of the Agreement.
However, Article V further states that this permissive authority of the Trustee (who
may distribute) is further subject to “the overriding instructions of Article III ¶2
hereof.” Paragraph 8 states that the “Trust shall be closed and the assets transferred
to M ary Reeves Davis’ husband.” (emphasis added) Article V, however, provides
further limitations. It provides that paragraph 8 is “subject to the overriding
instructions” of Article III, ¶2. (emphasis added) The latter provides that the
Trustee will essentially divide the proceeds of “each such payment” as
contemplated by the Agreement with half being held in trust for M ary Reeves Davis
and half being paid to Terry Davis. The Agreement however does not mention
these “payments.” Further, the only paragraph in the Agreement which is similar
in topic is paragraph 7 and it provides:
The monies for establishing the Trust shall be fifty
percent (50%) of the funds paid by United Shows of America
(officers of which are Ed Gregory and Jim Ed B rown) for the
properties held by Mary Reeves Davis and/or M ary Reeves
Davis and Terry Davis, in the amount of approximately 7.3
million dollars (7,300,000.00). These funds shall be paid
directly to the Trust by the purchasers of these properties.
(continued...)
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conclude that the provision in the Trust contain a latent ambiguity, we hold that the trial court did
not err in allowing extrinsic evidence of Mrs. Davis’s intent. In light of our holding, our review
of the trial court’s findings with regard to Mrs. Davis’s intent is governed by Tenn. R. App. P.
13(d) and, therefore, “shall be de novo upon the record of the trial court, accompanied by a
presumption of the correctness of the finding, unless the preponderance of the evidence is
otherwise.” The only testimony or facts in dispute in this matter are those offered through the
testimony of Terry Davis and Carrol Kilgore. The trial court excluded Mr. Davis’s testimony
under the Dead Man’s Statute, which provides:
In actions or proceedings by or against executors, administrators, or
guardians, in which judgments may be rendered for or against them,
neither party shall be allowed to testify against the other as to any
transaction with or statement by the testator, intestate, or ward, unless
called to testify thereto by the opposite party...
T.C.A. § 24-1-203 (2001)
9
(...continued)
Further, paragraph 8 uses the term “assets” which is clearly different than the term
“payments”–“assets” being more inclusive and “payments” being more limited.
The terminology used in paragraph 8 of the Agreement is of particular
interest. In pertinent part it reads “the Trust shall be closed and the assets
transferred to Mary Reeves Davis’ husband.” (emphasis added) W hat is meant by
the word “transferred”? Should one infer that Terry Davis, or more technically
Mary Reeves Davis’ husband is to receive the transfer of the assets in a fiduciary
capacity as the executor under her will with the resulting affirmative duty to
“administer” her probate estate, or does it mean that her husband is to receive the
transfer of assets as his property in fee without the duty of probate administration.
Endeavoring to limit its examination to within the four corners of the
documents, the Court has examined other relevant terminology in the Trust and
Agreement. In Article III (1) of the T rust, the following terminology is used, the
“Trustee shall receive...all monies to be paid out...of the aforesaid contracts....”
(emphasis added) Are the words “transfer” and “receive” synonymous in the sense
that a personal right of ownership does or does not attach? Do both imply an
interest in fee or do they impose a fiduciary responsibility with reference to what
is transferred or received?
Moreover, why does Article V provide that “[if] payment directly to my
husband be not authorized thereby,...(referring to paragraph 8 of the Agreement
with emphasis added) such mon[ies] shall be paid into my estate in accordance with
Article IV hereof”? Should one infer the same or a different meaning from the
phrase “payment directly to” my husband as distinguished from the phrases
“transfer” and/or “receive” as used elsewhere in the two documents?
(footnotes omitted).
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We find that Mr. Davis’s testimony falls within the Dead Man’s Statute in that Mr. Davis is a
party to this action against the Administrator of the Estate and he is seeking to testify against the
Estate concerning a “transaction or statement by [Mrs. Davis, the Decedent].” Consequently, the
trial court was correct in excluding Mr. Davis’s testimony. The testimony of Mr. Kilgore,
however, was not negated by the Dead Man’s Statute and was admissible for the limited purpose
of resolving the latent ambiguity. Since Mr. Davis’s testimony was properly excluded under the
Dead Man’s Statute, Mr. Kilgore’s testimony is uncontested. We have reviewed Mr. Kilgore’s
testimony, in conjunction with the trust instrument, and we find that the evidence does not
preponderate against the trial court’s finding that Mrs. Davis intended to “provide for the welfare
of herself and her husband while she was living and upon her death to pass her assets, inclusive
of the Trust assets, to her probate estate for probate administration.”
Although the case was tried in the trial court on the theories heretofore set out, we
consider the controlling issue in this case to be whether the provision of the Trust, under which
the Appellant claims the right to the trust estate, is valid. In essence, Paragraph 5 of the trust
instrument provides that if the settlor of the Trust, Mrs. Davis, predeceases her husband, the
Appellant herein, the trustee of the Trust may make distribution to Mrs. Davis’s husband as
provided therein. The language of this provision, under which the Appellant claims, is a
testamentary disposition of the trust estate. As this Court noted in Estate of Sinclair v. Keith
Sinclair, Inc., 894 S.W.2d 747 (Tenn. Ct. App. 1994):
An instrument taking effect at the death of the maker is a will.
See Pritchard on Wills, Vol. 1, § 19. It follows, therefore, that to be
valid such an instrument must comply with the statutory requirements
necessary to constitute a valid will. Wright v. Huskey, 592 S.W.2d
899 (Tenn. Ct. App. 1979). A conveyance of a present interest,
however, is not testamentary in character, even though the enjoyment
of the rights conveyed are postponed until the death of the donor or
grantor. Couch v. Hoover, 18 Tenn.App. 523, 79 S.W.2d 807 (1934).
The intent of the grantor--whether he intends to pass a present
irrevocable interest or one that takes effect at his death--is controlling.
Cockrell v. Tuell, 61 Tenn.App. 423, 454 S.W.2d 713 (1970).
Id. at 749.
The gravamen of the issue is Mrs. Davis’s intent, that is whether she intended to “pass a
present irrevocable interest or one that [took] effect at [her] death.” Cockrell, 454 S.W.2d 713.
From the plain language of Paragraph 5 of the trust instrument, it is clear that the provision for
Mr. Davis to acquire the property under the instrument is only triggered in the event of the death
of Mrs. Davis. Accordingly, we construe Paragraph 5 to be a testamentary disposition, which
must comply with the requirements for a testamentary document found at T.C.A. § 32-1-104
(2001). Since the instrument under which Mr. Davis claims does not comply with the formalities
required for a valid will, the provision of the agreement (i.e. Paragraph 5), insofar as it attempts
to vest any property in Mr. Davis, is invalid. The assets of the Trust, therefore, become a part of
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the Estate of Mrs. Davis and will be dealt with according to the instructions in her last will and
testament.
For the foregoing reasons, the order of the trial court granting summary judgment to
Appellee is affirmed. Costs of the appeal are assessed to the Appellant, W. Terry Davis, and his
surety.
__________________________________________
W. FRANK CRAWFORD, PRESIDING JUDGE, W.S.
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