Tennessee Business Litigation Lawyers Blog
A recent Tennessee undue influence case proves that establishing undue influence requires more than proving that the person who was allegedly unduly influenced totally trusted the defendant. The case also illustrates how the outcome of fraud cases and undue influence cases depends so critically on the facts of each individual case. Lastly, it also proves how differently a Tennessee trial court and the Court of Appeals of Tennessee might view the facts of an undue influence case.
The case is Eledge v. Eledge and here is a summary of the relevant facts:
- Father owned land
- Father had a son (“Son”) and a daughter (“Daughter”)
- Father became concerned that his land might be subject to the claims of creditors
- Father sought advice from Son about how to preserve his land from debts
- Son retained a lawyer who prepared a quitclaim deed for Father to sign
- The quitclaim deed transferred half of the land to Son and half to Daughter
- The quitclaim deed reserved a life estate in the land for Father
- It was undisputed that Father totally trusted Son and relied on him for financial advice
- Father was in good health, mentally and physically
- Father lived alone and independently
- While Son handled many business matters for Father and advised him, Father still handled a number of business matters competently and without Son’s help
- Father did not read the quitclaim deed before he signed it
- Two years after signing the quitclaim deed, Father became aware that he had only a life estate
- At the request of Father, Daughter conveyed her interest in the land back to Father
- Son refused to convey his interest in the land back to Father
Father filed an undue influence and fraud case against Son. Father alleged that Son owed him a duty to tell him that, if he signed the quitclaim deed, he was only retaining a life estate which would prohibit him from transferring the land if he wanted to do so. Father alleged that the failure of Son to disclose and explain was fraud because Son and he had a confidential relationship.
The trial court found that a confidential relationship existed between Father and Son. Therefore, it concluded, Son’s failure to disclose the ramifications of the quitclaim deed to Father was fraud.
The Court of Appeals reversed the trial court. It pointed out that, in Tennessee fraud cases, unless a party has a duty to disclose material facts, he is not required to do so. It restated the rule in Tennessee that a party to a transaction generally has no duty to disclose material facts and that such a duty may only arise in special circumstances, such as where there is a confidential relationship between the parties.
The problem that the Court of Appeals had with the trial court’s finding of a confidential relationship between Father and Son was that the facts did not support that conclusion. In Tennessee, a confidential relationship means more than just a relationship of trust and confidence. There must always be “dominion and control” to the extent that the stronger party controlled the weaker party such that the weaker party had no ability to resist.
Notably, the appeals court held that, even if Son had owed a duty to Father to disclose the effects of the quitclaim deed, it would not have changed the outcome of its ruling because, by just reading the quitclaim deed, Father could have become aware of the facts he alleged Son failed to disclose. In Tennessee, even if a party had a duty to disclose a material fact, he is not liable for fraud if the other party could have learned of the fact by the exercise of ordinary diligence.
For Tennessee lawyers who handle undue influence cases and fraud cases, the Eledge case is a reminder not to assume that a relationship of trust between older and younger family members will necessarily win an undue influence case or fraud case.