Arianna A. George v. Tessa G. Dunn

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

August 9, 2016 Session

ARIANNA A. GEORGE ET AL. v. TESSA G. DUNN

Appeal from the Chancery Court for Knox County

No. 189422-1 John F. Weaver, Chancellor

No. E2015-02312-COA-R3-CV-FILED-NOVEMBER 2, 2016

This case involves a trustee‟s disbursement of funds from two trusts, without

authorization of the trusts‟ respective beneficiaries, in order to pay legal expenses

incurred in defending against a prior action filed against the trustee on behalf of the

beneficiaries. The trial court had dismissed the prior action with prejudice in an agreed

order entered on August 31, 2012, which further provided that the funds at issue would

be disbursed by the trustee for the benefit of the beneficiaries. On April 13, 2015, the

beneficiaries filed a complaint, alleging that the trustee had violated the terms of the

August 2012 order and her fiduciary duty by writing checks against the trust funds in an

amount totaling $30,563.16. The trustee filed an answer, asserting that pursuant to

Maryland law governing the establishment of the trust accounts, she was entitled to be

reimbursed from the trust accounts for legal fees incurred in defense of the prior lawsuit

filed on behalf of the beneficiaries and ultimately dismissed. The beneficiaries filed a

motion for summary judgment. Following a hearing, the trial court granted summary

judgment in favor of the beneficiaries, awarding each beneficiary, respectively,

$15,281.58 plus prejudgment interest and attorney‟s fees. The trustee appeals.

Discerning no reversible error, we affirm. Having determined that the trial court did not

abuse its discretion by awarding attorney‟s fees upon the finding that the trustee breached

her fiduciary duty, we further determine an award to the beneficiaries of attorney‟s fees

on appeal to be appropriate. We remand for the trial court to determine the amount of

reasonable attorney‟s fees incurred by the beneficiaries during the appellate process.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirmed; Case Remanded

THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which D. MICHAEL

SWINEY, C.J., and FRANK G. CLEMENT, JR., P.J., M.S., joined.

Theodore R. Kern, Knoxville, Tennessee, for the appellant, Tessa G. Dunn.

Dudley W. Taylor, Knoxville, Tennessee, for the appellees, Arianna A. George and

Alexa C. George.

OPINION

I. Factual and Procedural Background

The prior action filed on behalf of the beneficiaries also came before this Court on

appeal. See Taylor v. George, No. E2014-00608-COA-R3-CV, 2015 WL 1218658

(Tenn. Ct. App. Mar. 16, 2015), perm. app. denied (Tenn. June 11, 2015). The trusts at

issue were created through the Last Will and Testament of Gloria G. George

(“Decedent”), who died in 2007 as a resident of Maryland. In her will, which was

probated in Maryland, Decedent provided for the establishment of separate trusts for each

of her two granddaughters, the plaintiffs, Arianna A. George and Alexa C. George

(collectively, “Plaintiffs”), to be initially funded with $50,000.00 each. Decedent named

as trustee her daughter, the defendant, Tessa G. Dunn, who is Plaintiffs‟ aunt. Plaintiffs

are the children, now adults, of Decedent‟s son, James T. George, and his former wife,

Melissa L. Taylor. Decedent also established a trust for Mr. George in her will, for which

Ms. Dunn was the trustee. See Taylor, 2015 WL 1218658, at *2.

Decedent‟s will originally established Plaintiffs‟ trust funds with the following

provisions:

a. If my son is then living, and if he has an obligation to make any

payment to his former wife, Melissa L. George, pursuant to the Final

Order of Separate Maintenance and Support dated November 27,

2001 and the Property and Separation Agreement dated November

27, 2001, and if Melissa L. George shall execute a receipt and

release acknowledging satisfaction of said obligation in part (in the

case of my son‟s older living child) or in whole (in the case of my

son‟s younger living child), then:

(1) Upon such child attaining age eighteen (18), my Trustee shall

distribute Forty Thousand Dollars ($40,000) from such

child‟s trust to Melissa L. George for the express purpose of

providing for such child‟s college, professional, and/or post-

graduate education.

(2) With respect to the balance of such child‟s trust, my Trustee

may expend such amounts of the net income, and to the

extent the net income is insufficient then of the principal, of

2

the trust as is necessary or appropriate, in my Trustee‟s sole

and absolute discretion, for the college, professional, and/or

post-graduate education of such child.

As part of the 2001 Final Order of Separate Maintenance and Support, entered by a South

Carolina court, Mr. George had agreed that he owed Ms. Taylor $80,000.00 in unpaid

spousal and child support. See Taylor, 2015 WL 1218658, at *1.

On June 30, 2009, Ms. Taylor, acting on her own behalf and as next friend of

Plaintiffs, filed an action against Mr. George and Ms. Dunn in the Knox County

Chancery Court (“trial court”). Ms. Taylor alleged, inter alia, that Mr. George and Ms.

Dunn had conspired to compel her to sign a release, as required by Decedent‟s will, in

return for a $70,000.00 settlement of the $80,000.00 divorce judgment while failing to

inform her that the $70,000.00 would be deducted from Plaintiffs‟ trust funds. Id. at *2.

Ms. Dunn had written a $35,000.00 check from each Plaintiff‟s respective trust fund, and

Mr. George had then delivered the $70,000.00 payment to Ms. Taylor‟s husband,

Plaintiffs‟ current counsel, Dudley W. Taylor. Id. Ms. Taylor sought declaratory

judgment regarding the parties‟ rights and liabilities, enforcement of the $80,000.00

divorce judgment, and a finding that Ms. Dunn had breached her fiduciary duties. Id.

Ms. Taylor deposited the $70,000.00 check she had received into the registry of the trial

court. Id.

On August 31, 2012, the trial court entered an agreed order dismissing with

prejudice the claims filed against Ms. Dunn on behalf of Plaintiffs. The agreed order

provided that the funds held by the court would be released to Ms. Dunn as trustee so that

she could restore the funds to Plaintiffs‟ trust accounts. Id. The order further provided

that the funds would be disbursed by Ms. Dunn “from the respective trusts for the benefit

of Alexa C. George and Arianna A. George pursuant to the terms of the trust

agreement[.]”

The remaining parties proceeded to trial on the claims brought in Ms. Taylor‟s

name against Mr. George and Ms. Dunn. The trial court ultimately dismissed the claims

against Ms. Dunn while upholding the divorce judgment against Mr. George and

assessing prejudgment and postjudgment interest. Taylor, 2015 WL 1218658, at *1. In

upholding the trial court‟s judgment, this Court concluded:

[T]he evidence supported the trial court‟s finding that Ms. Dunn and Mr.

George did act in concert and conspire to deplete Mr. George‟s trust assets

so that Ms. Taylor would be unable to collect her judgment against the

trust. As the trial court also properly found, however, there was no proof of

an underlying tortious or wrongful act that would support Ms. Taylor‟s

3

conspiracy claim. The will provided Ms. Dunn, as trustee, discretion to

make disbursements of Mr. George‟s trust fund assets. Even though Ms.

Dunn was aware of Ms. Taylor‟s unpaid judgment, Ms. Dunn was not

violating a court order or lien or otherwise acting in a fraudulent or tortious

manner by disbursing trust fund assets to Mr. George. By transferring

funds to Mr. George, Ms. Dunn initiated actions that she was lawfully

entitled to take as trustee. The fact that Ms. Dunn‟s actions resulted in

depletion of the trust assets before Ms. Taylor could enforce her judgment

against the trust does not render Ms. Dunn‟s actions fraudulent or tortious.

See, e.g., Burton v. Hardwood Pallets, Inc., No. E2001-00547-COA-R3-

CV, 2001 WL 1589162 at *5 (Tenn. Ct. App. Apr. 29, 2002) (holding that

there was no fraudulent conduct where a defendant creditor‟s lawful actions

to collect a debt resulted in an unsecured creditor‟s debt going unsatisfied).

Therefore, without the demonstration of the commission of a tortious or

wrongful act by Ms. Dunn, there can be no cognizable claim of civil

conspiracy. We determine that the trial court properly dismissed Ms.

Taylor‟s claims against Ms. Dunn in this matter.

Id. at *7.

The instant action was commenced on April 13, 2015, when Plaintiffs filed a

complaint alleging that Ms. Dunn had violated the terms of the August 2012 agreed order

and her fiduciary duty to Plaintiffs by writing checks to herself and Mr. George against

Plaintiffs‟ trust funds. Ms. Dunn acknowledges that in September 2012, she wrote two

“reimbursement” checks on each trust account, ostensibly to reimburse her personal

funds and Mr. George for attorney‟s fees incurred in defense of the prior action brought

on behalf of Plaintiffs. On September 20, 2012, the trial court clerk disbursed to Ms.

Dunn $70,734.10, including the $70,000.00 provided by the agreed order plus interest

earned. On September 20, 2012, Ms. Dunn wrote two checks in the amount of

$12,500.00 to Mr. George, one drawn from each of the Plaintiff‟s trust funds. On

September 21, 2012, Ms. Dunn wrote two checks in the amount of $2,781.58 to herself,

also drawing one check from each of Plaintiff‟s trust funds. Ms. Dunn explained in an

affidavit presented to the trial court that although she initially had utilized monies from

Mr. George‟s trust, for which she was also the trustee, to pay legal expenses, she wrote

the corresponding “reimbursement” checks directly to Mr. George because his trust had

been dissolved by that time. The total amount that Ms. Dunn withdrew from Plaintiffs‟

combined trust funds was $30,563.16.

Although Plaintiffs had requested an award of attorney‟s fees “if applicable” in

their original complaint, Plaintiffs filed an amendment to their complaint on April 30,

2015, adding that they sought “their reasonable attorney fees for the intentional breach by

4

Defendant of her fiduciary duty . . . .” Ms. Dunn subsequently filed an answer,

documenting her legal expenses for defense of the prior action and asserting that pursuant

to Maryland law governing the establishment of the trust accounts, she was entitled to be

reimbursed from the trusts for her legal fees incurred in defense of the prior lawsuit.

Ms. Dunn maintains that the legal expenses for which she reimbursed herself

pertained to defense of the action pursued on Plaintiffs‟ behalf and not the action pursued

by Ms. Taylor individually. Ms. Dunn also maintains that she met with Plaintiffs in

September 2012, prior to writing the reimbursement checks, and explained to Plaintiffs

that she would be reimbursing herself from their trust funds for the substantial legal fees

she had incurred in defending against their prior lawsuit. Plaintiffs deny that such a

meeting took place and deny that Ms. Dunn provided them with advance notice that she

would be withdrawing funds from their trust accounts as reimbursement for her legal

fees.

On June 23, 2015, Plaintiffs filed a motion for summary judgment and a statement

of “Material Facts as to which there is No Genuine Issue for Trial.” Ms. Dunn filed a

response and statement of additional facts on July 27, 2015, inter alia, acknowledging

that she did not obtain consent from Plaintiffs for the trust withdrawals at issue but

asserting that she did provide them with prior notice of the withdrawals.

Following a hearing conducted on August 6, 2015, the trial court granted the

parties ten days for supplemental briefing on applicable Maryland law. Specifically, the

court directed in an order entered August 14, 2015:

After taking into account all documents filed in support of and against the

Motion, the Court elected to defer its ruling in order to give the parties,

through counsel, an opportunity to research the issue of whether Maryland

law offers any support for the proposition that a trustee of a trust is

protected against claims of the beneficiaries for making disbursements of

trust funds to persons who are not trust beneficiaries, by reason of giving

advance notice of such intended disbursements, whether or not the

beneficiaries consent.

On September 24, 2015, the trial court entered a Memorandum Opinion, granting

partial summary judgment in favor of Plaintiffs. Upon finding that Ms. Dunn had

violated the agreed order and breached her fiduciary duty to Plaintiffs, the court awarded

to each respective Plaintiff the amount of $15,281.58, plus prejudgment interest of five

percent per annum calculated from September 20, 2012, on each $12,500.00 check and

from September 21, 2012, on each $2,781.58 check. The court also awarded to Plaintiffs

5

reasonable attorney‟s fees but reserved the amount for an evidentiary hearing. The court

entered an Order to this effect on November 6, 2015.

Ms. Dunn filed a notice of appeal on December 4, 2015. On January 8, 2016, the

trial court entered an order awarding to Plaintiffs attorney‟s fees in the amount of

$6,000.00 and costs in the amount of $244.33, contingent upon Plaintiffs‟ success on

appeal. Upon submission of the final judgment, this Court treated Ms. Dunn‟s premature

appeal as timely pursuant to Tennessee Rule of Appellate Procedure 4(d).

II. Issues Presented

Ms. Dunn presents three issues on appeal, two of which we determine to be

included in her overall issue of whether the trial court erred by granting partial summary

judgment in favor of Plaintiffs. We have restated Ms. Dunn‟s issues as follows:

1. Whether the trial court erred by granting partial summary judgment

in favor of Plaintiffs upon:

A. Declining to consider or address the effect of Maryland law

on Ms. Dunn‟s asserted right to reimburse herself for

attorney‟s fees incurred in defense of a prior lawsuit brought

against her on behalf of Plaintiffs.

B. Interpreting the August 31, 2012 agreed order as negating Ms.

Dunn‟s asserted right under Maryland law to claim

reimbursement from Plaintiffs‟ trust funds for legal fees

incurred in defense of the prior suit.

Plaintiffs present an additional issue, which we have restated as follows:

2. Whether Plaintiffs are entitled to attorney‟s fees on appeal, either

upon a determination that this appeal is frivolous, pursuant to

Tennessee Code Annotated § 27-1-122, or upon the trial court‟s

finding that Ms. Dunn breached her fiduciary duty to Plaintiffs.

III. Standard of Review

The grant or denial of a motion for summary judgment is a matter of law;

therefore, our standard of review is de novo with no presumption of correctness. See Rye

v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015); Dick

Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 671 (Tenn. 2013)

6

(citing Kinsler v. Berkline, LLC, 320 S.W.3d 796, 799 (Tenn. 2010)). As such, this Court

must “make a fresh determination of whether the requirements of Rule 56 of the

Tennessee Rules of Civil Procedure have been satisfied.” Rye, 477 S.W.3d at 250. As

our Supreme Court has explained concerning the requirements for a movant to prevail on

a motion for summary judgment pursuant to Tennessee Rule of Civil Procedure 56:

We reiterate that a moving party seeking summary judgment by attacking

the nonmoving party‟s evidence must do more than make a conclusory

assertion that summary judgment is appropriate on this basis. Rather,

Tennessee Rule 56.03 requires the moving party to support its motion with

“a separate concise statement of material facts as to which the moving party

contends there is no genuine issue for trial.” Tenn. R. Civ. P. 56.03. “Each

fact is to be set forth in a separate, numbered paragraph and supported by a

specific citation to the record.” Id. When such a motion is made, any party

opposing summary judgment must file a response to each fact set forth by

the movant in the manner provided in Tennessee Rule 56.03. “[W]hen a

motion for summary judgment is made [and] . . . supported as provided in

[Tennessee Rule 56],” to survive summary judgment, the nonmoving party

“may not rest upon the mere allegations or denials of [its] pleading,” but

must respond, and by affidavits or one of the other means provided in

Tennessee Rule 56, “set forth specific facts” at the summary judgment

stage “showing that there is a genuine issue for trial.” Tenn. R. Civ. P.

56.06. The nonmoving party “must do more than simply show that there is

some metaphysical doubt as to the material facts.” Matsushita Elec. Indus.

Co., 475 U.S. [574,] 586, 106 S.Ct. 1348 [(1986)]. 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. If a

summary judgment motion is filed before adequate time for discovery has

been provided, the nonmoving party may seek a continuance to engage in

additional discovery as provided in Tennessee Rule 56.07. However, after

adequate time for discovery has been provided, summary judgment should

be granted if the nonmoving party‟s evidence at the summary judgment

stage is insufficient to establish the existence of a genuine issue of material

fact for trial. Tenn. R. Civ. P. 56.04, 56.06. The focus is on the evidence

the nonmoving party comes forward with at the summary judgment stage,

not on hypothetical evidence that theoretically could be adduced, despite

the passage of discovery deadlines, at a future trial.

Rye, 477 S.W.3d at 264-65 (emphasis in original). Pursuant to Tennessee Rule of Civil

Procedure 56.04, the trial court must “state the legal grounds upon which the court denies

or grants the motion” for summary judgment, and our Supreme Court has instructed that

7

the trial court must state these grounds “before it invites or requests the prevailing party

to draft a proposed order.” See Smith v. UHS of Lakeside, Inc., 439 S.W.3d 303, 316

(Tenn. 2014).

IV. Effect of Maryland Law

Ms. Dunn contends that the trial court erred by declining to consider or address

whether, under Maryland law, she had a right to deduct funds from Plaintiffs‟ trust funds

as reimbursement for the legal expenses she incurred as a result of the prior action filed

on behalf of Plaintiffs. Plaintiffs do not dispute that because Decedent‟s will did not

designate a state jurisdiction, “the laws of the principal place of [the trusts‟]

administration determine the administration of the trust[s].” See Tenn. Code Ann. § 35-

15-107(c) (2015). Although the trial court allowed the parties ten days following the

summary judgment hearing to file supplemental memoranda concerning the effect of

Maryland law on this issue, the court did not directly address the application of Maryland

law in its memorandum opinion or order awarding partial summary judgment. The trial

court based its ruling upon the findings that Ms. Dunn had (1) violated the terms of the

agreed order by withdrawing funds from Plaintiffs‟ trust accounts with no resultant

benefit to Plaintiffs and (2) breached her fiduciary duty as trustee of Plaintiffs‟ trusts.

Upon our thorough review of the record and applicable authorities, we conclude that the

trial court did not err by declining to find that Maryland law provided Ms. Dunn with the

right to reimburse herself from Plaintiffs‟ trust accounts without prior authorization of the

trial court or consent of Plaintiffs.

The August 31, 2012 agreed order provided in relevant part:

This case is before the Court on the request of the parties to restore

funds currently held in escrow by the Clerk and Master to the trust funds of

Alexa C. George and Arianna A. George. The Court finds that Tessa G.

Dunn, as trustee of the trusts for Alexa C. George and Arianna A. George,

previously distributed $35,000.00 from each trust to Melissa L. Taylor, that

Melissa L. Taylor placed the money in escrow with the Clerk and Master,

and that the parties agree this money, plus any interest which may have

accrued, should be returned to the respective trusts. The Court further finds

the parties agree that return of the escrowed funds resolves all claims

brought against Tessa G. Dunn on behalf of Alexa C. George and Arianna

A. George, and that those claims should be dismissed.

***

Accordingly, it is hereby ORDERED:

8

1. The Clerk and Master shall release all funds currently held in escrow

in this case to Tessa G. Dunn as trustee for the trusts established for

the benefit of Alexa C. George and Arianna A. George;

2. Tessa G. Dunn shall deposit one-half of the funds released by the

Clerk and Master in the trust established for Alexa C. George and

one-half in the trust established for Arianna A. George, and shall

disburse said funds from the respective trusts for the benefit of Alexa

C. George and Arianna A. George pursuant to the terms of the trust

agreement;

3. All claims brought against Tessa G. Dunn on behalf of Alexa C.

George and Arianna A. George are hereby dismissed, with

prejudice[.]

(Emphasis added.) In the instant action, the trial court found that because Ms. Dunn had

undisputedly used the funds withdrawn from Plaintiffs‟ trusts on September 20 and 21,

2012, for other than Plaintiffs‟ benefit, Ms. Dunn had violated the agreed order. Ms.

Dunn, however, focuses on the phrase, “pursuant to the terms of the trust agreement” to

argue that under Maryland law governing administration of Plaintiffs‟ trusts, she was

entitled to utilize trust monies to reimburse herself for legal expenses incurred in

defending herself against the portion of the prior lawsuit filed on behalf of Plaintiffs.

The trial court in its November 6, 2015 order summarized the pleadings and

authorities it had considered in reaching its ruling as follows:

This matter came before the Court on the Motion of Plaintiffs for

Summary Judgment. The matter was presented to the Court on oral

argument on August 6, 2015. The Court thereafter took the matter under

advice and further, offered the parties through counsel the opportunity to

file supplemental briefs on the issue of whether Maryland law protects a

trustee from the consequences of making an otherwise unauthorized

disbursement if the trustee has given prior notice to the beneficiary. The

Court thereafter issued its Memorandum Opinion on September 24, 2015

based upon the Motion, supporting affidavits, the response of Defendant,

opposing affidavits, briefs, and such other matters as the Court found to be

pertinent to the issues in the case.

Contrary to Plaintiffs‟ argument, the trial court thus considered the pleadings in which the

parties addressed Maryland case law, including Ms. Dunn‟s response to the motion for

9

summary judgment and Plaintiffs‟ memorandum filed subsequent to the summary

judgment hearing. The trial court, however, was not persuaded that Maryland law

afforded Ms. Dunn the right to utilize trust fund monies to reimburse herself for legal fees

in this situation.

In granting partial summary judgment in favor of Plaintiffs, the trial court stated in

its memorandum opinion in pertinent part:

The pivotal issue for the motion is whether the defendant Tessa G. Dunn

disbursed funds of the trusts in violation of an agreed order. The Court

entered the agreed order upon the agreement of the defendant Dunn and the

other parties in a prior case in this court concerning the funds, case number

175472-1. The defendant Dunn was entrusted with the funds from this

Court‟s registry to be restored to the trusts and disbursed by her “from the

respective trusts for the benefit of Alexa [C]. George and Arianna A.

George [the plaintiffs] pursuant to the terms of the trust agreement[.”]

[emphasis added (by trial court)]. The defendant Dunn disbursed the funds,

in question, to herself and her brother, to reimburse monies spent by the

defendant Dunn from her own funds and the trust funds of her brother. No

benefit to the plaintiffs has been identified to the Court from the defendant

Dunn‟s disbursements of their trust funds.

***

[T]he funds of $70,734.10, including interest earned while on deposit with

the Clerk and Master, were returned in the amount of $35,367.05 to each of

the two trusts. Pursuant to the agreed order, the defendant Dunn was then

to “disburse said funds from the respective trusts for the benefit of Alexa C.

George and Arianna A. George [the plaintiffs] pursuant to the terms of the

trusts agreements.” Instead, the defendant Dunn disbursed the sum of

$2,781.58 from each trust to reimburse herself for legal fees paid by her in

the original suit against her. The defendant Dunn also disbursed the sum of

$12,500.00 from each trust to her brother and co-defendant in the original

case, in the amount of $12,500.00 to compensate him for monies used by

Dunn from his trust for her own legal fees in the original case. The record

shows no possible benefit to either of the plaintiffs as a result of the

defendant Dunn‟s disbursement of $2,781.58 and $12,500.00 from each

trust to herself and her brother, respectively. The defendant Dunn‟s

counsel could not identify any such benefit at the hearing on the motion for

summary judgment currently before this Court. Moreover, in his post

hearing memorandum entitled, “DEFENDANT‟S RESPONSE TO

10

PLAINTIFF‟S MEMORANDUM IN SUPPORT OF MOTION FOR

SUMMARY JUDGMENT,” the defendant‟s counsel states that the

“[p]ayment of legal fees did not benefit the girls but was made necessary by

their action, and was permissible as an expense of administering the trusts.”

The agreed order, under which the monies were entrusted to the defendant

Tessa G. Dunn, specifically required that any such disbursements be made

for the benefit of the plaintiffs.

The defendant Dunn violated the agreed order. The parties to the

original case entered into the agreed order within the context of allegations

that the defendant Dunn manipulated trust transfers for the benefit of her

brother and to defeat the claim of child support for the plaintiffs, his

daughters. . . . There is no genuine issue of material fact but that neither of

the plaintiffs consented to nor authorized any of the disbursements in

question.

Additionally, there is no genuine issue of material fact or question of

law but that the defendant Dunn breached her fiduciary duty to each

plaintiff by her disbursements from each trust of $2,781.58 to herself and

$12,500.00 to her brother.

(Emphasis in original; citations omitted.)

We agree with the trial court. We find the Maryland appellate decisions relied

upon by Ms. Dunn to be highly factually distinguishable from the case at bar. Ms. Dunn

relies in part on a decision rendered by the Maryland Court of Special Appeals, Saulsbury

v. Denton Nat’l Bank, 335 A.2d 199, 204 (Md. Ct. Spec. App. 1975), perm. app. denied

(Md. July 3, 1975), in which the court held that “unless there has been a final

determination as to the alleged misconduct of the cotrustee, such alleged misconduct

cannot be interposed as a defense to a petition for attorney fees for the services rendered

in defending the trustee.” The Saulsbury court, however, was addressing a petition for

attorney‟s fees, which had been reviewed and granted by the trial court following a

hearing on the matter. Id. at 671.

Ms. Dunn also relies on the Maryland intermediate appellate court‟s decision in

Jacob v. Davis, 738 A.2d 904, 921 (Md. Ct. Spec. App. 1999), in which the court

explained that “[t]he general rule is that a trustee is entitled to attorneys‟ fees paid from

the trust if it successfully defends an action brought by the beneficiary.” The Jacob

court, however, was examining the issue of what portion of the attorney‟s fees could be

included in an award already granted to the trustee by the trial court. See id. at 921. In

this regard, the Jacob court was reviewing the trial court‟s prior award of attorney‟s fees

11

to the trustee, not a deduction for reimbursement made by the trustee on his own volition.

See id. at 904; see also Sokol v. Nattans, 337 A.2d 460, 473-75 (Md. Ct. Spec. App.

1975) (affirming the trial court‟s award of attorney‟s fees to the trustees upon the filing of

a petition for such fees).

In their supplemental memorandum to the trial court, Plaintiffs referenced a

decision rendered by Maryland‟s highest state court, the Maryland Court of Appeals,

Hastings v. PNC Bank, NA, 54 A.3d 714, 726 (Md. 2012), in which the court held that “a

trustee may engage in a self-interested course of action so long as the beneficiaries

provide valid, informed consent.” The Hastings court was addressing, in the context of

Plaintiffs‟ reference, the issue of whether the trustee had violated his duty of loyalty to

the beneficiaries by requiring the beneficiaries to execute a release and indemnity clause

prior to distribution of trust funds. Hastings, 54 A.3d at 725 (concluding that the trustee

had not violated this duty). The Hastings court did not address the issue of consent for

reimbursement of attorney‟s fees.

Ms. Dunn has provided no Maryland authority, and our research has not revealed

any, to support the proposition that a trustee may deduct funds from a trust account to pay

legal expenses incurred in defense of the trustee‟s role as trust administrator without a

court order awarding attorney‟s fees or the prior consent of the beneficiary. 1 Moreover,

although Plaintiffs‟ complaint against Ms. Dunn was dismissed with prejudice in the

prior suit, the dismissal was predicated on the return of the $70,000.00 Ms. Dunn had

withdrawn from Plaintiffs‟ collective trust accounts. See Taylor, 2015 WL 1218658, at

*3 (“[T]he [trial] court determined that Ms. Taylor‟s children had attained the age of

majority and were not pursuing claims to invalidate the settlement because the funds had

been restored to their trusts.”). Ms. Dunn cannot be said to have prevailed on the merits

in defending the prior action filed on behalf of Plaintiffs. See Jacob, 738 A.2d at 921

(remanding to the trial court for “allocat[ion] to the Trusts only that portion or percentage

of the fees it considers, in its discretion, to be fairly attributable to the successful aspects

of the defense.”). Ms. Dunn is not entitled to relief on this issue.

VI. Interpretation of Agreed Order

Ms. Dunn also contends that the trial court erred by interpreting the August 2012

agreed order as waiving Ms. Dunn‟s right to reimbursement for attorney‟s fees incurred

in defending against the prior action brought on behalf of Plaintiffs. As the trial court

found, the parameters of the parties‟ August 2012 agreed order, which was entered under

1

We note by analogy the general principle under Tennessee law that “the Estate should not be charged

with an executor‟s legal fees and costs when the „executor‟s conduct is at the root of the litigation.‟” See

Estate of Boote v. Shivers, No. M2003-02656-COA-R3-CV, 2005 WL 1277867, at *5 (Tenn. Ct. App.

May 27, 2005) (quoting In re Estate of Wallace, 829 S.W.2d 696, 704 (Tenn. Ct. App. 1992)).

12

the jurisdiction of a Tennessee court, included the provision that any disbursement of

trust account funds would be for the benefit of Plaintiffs. See City of Shelbyville v. State

ex rel. Bedford County, 415 S.W.2d 139, 144 (Tenn. 1967) (“A consent decree is a

contract made final and binding upon the parties by the approval of the court.”); see also

Kafozi v. Windward Cove, LLC, 184 S.W.3d 693, 698 (Tenn. Ct. App. 2005) (“The

parties‟ intent is presumed to be that specifically expressed in the body of the contract.”).

Moreover, having determined that the trial court did not err by declining to find that

Maryland law afforded Ms. Dunn the right to withdraw fees for her reimbursement absent

Plaintiffs‟ prior consent or a court order authorizing such reimbursement, we further

determine the issue of whether Ms. Dunn “waived” this purported right to be pretermitted

as moot.

VII. Attorney‟s Fees on Appeal

Plaintiffs request an award of attorney‟s fees on appeal, asserting as alternative

grounds that (1) the appeal is frivolous, thereby warranting an award of attorney‟s fees

pursuant to Tennessee Code Annotated § 27-1-122, and (2) Ms. Dunn breached her

fiduciary duty to Plaintiffs, thereby warranting an award of attorney‟s fees on appeal for

the same reason that the trial court awarded attorney‟s fees to Plaintiffs. Ms. Dunn

argues that this appeal is not frivolous and that an award of attorney‟s fees on appeal

based on the finding that she violated her fiduciary duty is not supported by controlling

authority. Upon our thorough review, we conclude that this appeal is not frivolous.

However, we further conclude that an award of attorney‟s fees on appeal is appropriate

based on Ms. Dunn‟s breach of her fiduciary duty as trustee of Plaintiffs‟ respective

trusts.

Tennessee Code Annotated § 27-1-122 (2000) provides:

When it appears to any reviewing court that the appeal from any court of

record was frivolous or taken solely for delay, the court may, either upon

motion of a party or of its own motion, award just damages against the

appellant, which may include but need not be limited to, costs, interest on

the judgment, and expenses incurred by the appellee as a result of the

appeal.

We determine that this appeal was not frivolous or taken solely for delay. See Young v.

Barrow, 130 S.W.3d 59, 67 (Tenn. Ct. App. 2003) (“A frivolous appeal is one that is

devoid of merit . . . or one that has no reasonable chance of succeeding.”).

13

Ms. Dunn does not dispute, however, the trial court‟s award of reasonable

attorney‟s fees to Plaintiffs based on the finding that Ms. Dunn breached her fiduciary

duty. The trial court stated in its memorandum opinion in pertinent part:

[T]here is no genuine issue of material fact or question of law but that the

defendant Dunn breached her fiduciary duty to each plaintiff by her

disbursements from each trust of $2,781.58 to herself and $12,500.00 to her

brother. The plaintiffs are entitled to a partial summary judgment as a

matter of law. The summary judgment constitutes a determination that the

defendant Dunn, while acting as trustee, is liable to the plaintiffs for

“breach of trust [f]or maladministration.[”] Marshall v. First Nat. Bank of

Lewisburg, 622 S.W.2d 558, 560 (Tenn. Ct. App. 1981). The plaintiffs did

not plead their attorney fees as an element of special damages in their

complaint, as amended, but did put the defendant Dunn on notice, by

praying for attorney‟s fees, of their claim for attorney‟s fees, in their

original complaint and amendment to complaint. See Marshall v. First Nat.

Bank of Lewisburg, 622 S.W.2d at 560-61.2

In its subsequent January 8, 2016 order, the trial court ratified the parties‟

agreement that this award would be comprised of $6,000.00 in attorney‟s fees and

$244.33 in costs, provided that Plaintiffs prevailed on appeal. Although Ms. Dunn has

not raised the trial court‟s award of attorney‟s fees as an issue on appeal, we have

reviewed the trial court‟s rationale as a potential rationale for this Court to award

attorney‟s fees on appeal. We determine that the trial court did not abuse its discretion by

awarding attorney‟s fees to Plaintiffs based on its finding that Ms. Dunn had breached her

fiduciary duty. See Wright ex rel. Wright v. Wright, 337 S.W.3d 166, 176 (Tenn. 2011)

(explaining that this Court reviews a trial court‟s award of attorney‟s fees according to an

abuse of discretion standard); see also In re Estate of Greenamyre, 219 S.W.3d 877, 886

(Tenn. Ct. App. 2005) (“[A] trial court will be found to have „abused its discretion‟ only

when it applies an incorrect legal standard, reaches a decision that is illogical, bases its

2

Ms. Dunn does not dispute that Plaintiffs gave adequate notice that they were seeking attorney‟s fees

through their initial prayer for attorney‟s fees in the complaint and specific prayer in their amendment to

the complaint for attorney‟s fees pursuant to Ms. Dunn‟s alleged violation of her fiduciary duty. See

Marshall v. First Nat’l Bank of Lewisburg, 622 S.W.2d 558, 561 (Tenn. Ct. App. 1981) (“In cases

involving trusts and large estates involving complex litigation, the attorneys‟ fees are apt to be substantial

and it seems only fair to require the plaintiff to put the trustee on notice as to any claim for attorneys‟

fees.”); but see Duke v. Simmons, No. M2008-01967-COA-R3-CV, 2009 WL 1175114, at *4 (Tenn. Ct.

App. Apr. 30, 2009) (noting that “[t]he holding in Marshall has been modified by the courts under certain

circumstances . . . .” involving situations in which “a statute specifically authorizes the recovery of

attorney‟s fees from another party.”) (citing In re Estate of Greenamyre, 219 S.W.3d 877, 885 n.22

(Tenn. Ct. App. 2005)).

14

decision on a clearly erroneous assessment of the evidence, or employs reasoning that

causes an injustice to the complaining party.”) (internal citations omitted).

As the trial court noted, this Court set forth the proposition in Marshall v. First

Nat’l Bank of Lewisburg, 622 S.W.2d 558, 560 (Tenn. Ct. App. 1981), perm. app. denied

(Tenn. Nov. 2, 1981), that “it is generally held that where an action is brought against a

trustee for breach of trust or for maladministration, attorneys‟ fees will be allowed . . . .”

while explaining also that “such fees should not be allowed where the trustee has been

faithful, diligent, and successful in his administration.” As this Court has explained

regarding the availability of attorney‟s fees upon a trustee‟s breach of fiduciary duty:

The appellant argues that there is no statutory or contractual basis for

the trial court‟s award of attorney fees. We believe, however, that there is a

basis in case law and in statute for both components of the trial court‟s

award. As the appellee notes, several cases of this court support the

proposition that attorney fees may be awarded against a trustee who

breaches her fiduciary duty. Brandt v. Bib Enterprises, 986 S.W.2d 586

(Tenn. Ct. App. 1998); Marshall v. First National Bank of Lewisburg, 622

S.W.2d 558 (Tenn. Ct. App. 1981).

Although attorney fees should not be imposed where there is merely

a technical fault on the part of the fiduciary, 622 S.W.2d at 560, the

imposition of such fees on fiduciaries who deliberately use their position of

trust to enrich themselves creates a disincentive to such behavior.

Martin v. Moore, 109 S.W.3d 305, 313 (Tenn. Ct. App. 2003), perm. app. denied (Tenn.

May 19, 2003).

In support of their argument, Plaintiffs cite this Court‟s decision in Brandt v. Bib

Enters., Ltd., 986 S.W.2d 586 (Tenn. Ct. App. 1998), perm. app. denied (Tenn. Mar. 8,

1999). In Brandt, this Court affirmed the trial court‟s denial of attorney‟s fees to the

appellees in an action brought under the version of the Uniform Limited Partnership Act

in effect at that time. Brandt, 986 S.W.2d at 595. Although Brandt did not involve a

trust, the Brandt Court explained as examples that “Tennessee cases have allowed

attorney‟s fee awards for breaches of a trustee‟s fiduciary duty.” Id. The Brandt Court

cited Marshall for this proposition, as well as Brown v. Conroy, 1990 WL 10574 (Tenn.

Ct. App. Feb. 12, 1990), perm. app. denied (Tenn. May 14, 1990). In Brown, this Court

affirmed the trial court‟s award of attorney‟s fees against a co-trustee, Carolyn Brown,

who had breached her fiduciary duty. Brown, 1990 WL 10574, at *6. Although Ms.

Brown “feign[ed] innocence” of the effect of her former counsel‟s actions in holding

insurance policy documents “contrary to the best interests of the trust and its

15

beneficiaries,” this Court found that “[a]ll actions on the part of counsel which are

inconsistent with the fiduciary duty owed to the trust [were] imputed to Carolyn Brown.”

Id. at *5-6. Based on the determination that an award of attorney‟s fees was warranted

when the co-trustee had breached her fiduciary duty contrary to the best interest of the

trust and its beneficiaries, this Court awarded attorney‟s fees against Ms. Brown on

appeal. Id. at *9 (“Having found that attorney fees were properly allowed below, we

believe they are also properly allowable to [the plaintiff beneficiary] on appeal.”).

In the case at bar, Ms. Dunn asserted in her affidavit:

Prior to writing any checks for legal fees from either of the girls‟

trust funds I consulted with counsel to determine whether I could pay legal

defense expenses from the trusts. I was advised that the terms of the trust

authorized me to pay legal expenses which I incurred as trustee from trust

fund assets.

Regarding notice to Plaintiffs of her decision to reimburse herself from their respective

trust funds, Ms. Dunn stated:

In September 2012 I met with Arianna and Alexa George and with

my brother. At that time I explained to Arianna and Alexa that I was

incurring legal expenses because of the suit filed by Melissa Taylor and that

I would be paying some of the legal expenses from their trust funds.

(Paragraph numbering omitted.)

In contrast, Plaintiffs in their respective affidavits presented to the trial court

denied that they had received such notice. Arianna George stated in pertinent part:

In May, 2014, I was informed by Aunt Tessa that no funds remained

in my Trust. I asked her for an accounting.

Aunt Tessa came to Knoxville and met with Alexa and me. Our

Father, James T. George, II . . . was also present at this meeting. Aunt

Tessa informed at this meeting that she had paid some of her attorney fees

incurred in the Prior Suit from my Trust. I had not authorized any such

disbursement and had no notice of it prior to this meeting in May, 2014.

(Paragraph numbering omitted.)

16

In her corresponding affidavit, Alexa George mirrored her sister‟s statement in this

regard.

Plaintiffs acknowledge that for purposes of summary judgment, this Court must

treat Ms. Dunn‟s statement that she gave notice as true unless it is to be a disputed issue

of material fact that would have to be determined at trial. We previously have concluded,

however, that even assuming, arguendo, that Ms. Dunn gave notice to Plaintiffs of her

intention to withdraw trust monies to pay legal expenses, such notice without Plaintiffs‟

authorization or a court order awarding such expenses to Ms. Dunn did not constitute

legal grounds under applicable law for Ms. Dunn to reimburse herself or her brother from

Plaintiffs‟ trust accounts. See, e.g, Hastings 54 A.3d at 726. As in Brown, see 1990 WL

10574, at *6, we are not persuaded that Ms. Dunn‟s purported consultation with counsel

prior to writing checks on the trust accounts to pay her legal expenses absolves her of

having breached her fiduciary duty to the beneficiaries in this case.3

Plaintiffs properly requested reasonable attorney‟s fees in their appellate

pleadings. See Killingsworth v. Ted Russell Ford, Inc., 205 S.W.3d 406, 411 (Tenn.

2006) (“An award of attorney‟s fees generated in pursuing the appeal is a form of relief;

the rule requires it to be stated.”) (citing Tenn. R. App. P. 27(a)). Having determined that

the trial court did not abuse its discretion by awarding to Plaintiffs reasonable attorney‟s

fees upon a finding that Ms. Dunn breached her fiduciary duty as trustee of Plaintiffs‟

respective trusts, we further determine that an award to Plaintiffs of reasonable attorney‟s

fees on appeal is appropriate for the same reason. We remand this matter to the trial

court for a determination of the proper amount of reasonable fees incurred by Plaintiffs

during the appellate process.

VIII. Conclusion

For the reasons stated above, we affirm the trial court‟s judgment. We grant

Plaintiffs‟ request for an award of reasonable attorney‟s fees on appeal. This case is

remanded to the trial court, pursuant to applicable law, for a determination of the amount

of reasonable attorney‟s fees incurred by Plaintiffs during the appellate process,

enforcement of the trial court‟s judgment, and collection of costs assessed below. The

costs on appeal are assessed against the appellant, Tessa G. Dunn.

_________________________________

THOMAS R. FRIERSON, II, JUDGE

3

We note that it is unclear from Ms. Dunn‟s affidavit or her appellate pleadings whether her current

counsel is whom she purportedly consulted prior to writing the checks at issue.

17