Tennessee Business Litigation Lawyers Blog

Tennessee Jury Stings Insurance Company in Bad Faith Failure to Pay and Breach of Contract Case

Published on: January 31, 2014 | by J. Ross Pepper

A jury in Bradley County, Tennessee handed down substantial punitive damages award and compensatory damages award against Erie Insurance Exchange (“Erie”) in a case involving its failure to pay a claim for losses arising from vandalism and theft at apartment units which it insured. The case is a must read for lawyers who handle insurance policy cases and bad faith failure to pay cases. Why? First, the case is highly unusual because the jury in the case awarded punitive damages on a breach of contract claim.

In my experience, punitive damages are rarely, if ever, awarded by Tennessee juries merely for a party’s breach of a contract. In fact, for better or for worse, they are awarded much less often, even in cases involving fraud and intentional torts, than most lay people would expect.

The case is also important because it is sound authority for the position that an insured can receive more in compensatory damages for an insurance company’s failure to pay a claim than just the amount of the amount of the claim made by the insured, but not paid, plus the statutory 25% percent penalty for bad faith failure to pay.

What Happens When the Language of a Will Is Not Clear? Court of Appeals of Tennessee Reviews Guidelines

Published on: December 23, 2013 | by J. Ross Pepper

In probate litigation in Tennessee, disputes sometimes center on what the person who made the will (the “testator” or “testatrix”) meant in the will. Such litigation can fairly easily be avoided by careful will drafting. Nevertheless, wills are sometimes not sufficiently precise or are susceptible to different interpretations–particularly wills drafted by non-lawyers.

The Court of Appeals of Tennessee recently issued an opinion in a case involving a holographic (handwritten) will which was phrased such that it was unclear who the testator meant to make the beneficiaries of his will. The case provides a helpful summary of the basic Tennessee law that applies when a court is confronted with a will which can be interpreted in more than one way.

A husband (“Husband”) drafted his own will. In the will, he stated that all of his property was to be left to his wife’s daughter “to be divided as she sees fit among kids. . . .” The wife’s daughter had several children. Husband passed away and his handwritten will was admitted to probate.

The Resulting Trust Theory of No Help to Mother Who Paid for Construction Costs of Home

Published on: December 5, 2013 | by J. Ross Pepper

There are many situations in which Tennessee courts have been able to impose resulting trusts to recover property for aggrieved parties when no other legal avenue was available to help. The law of resulting trusts, to boil it down to the point of over generalization, allows a court “to follow the money” of the party taken advantage of to property purchased with that money, and then to place a resulting trust on the property. Once a resulting trust is imposed on property, a court can provide relief to the injured party by divesting title to the property out of the titled owner and/or vesting it in the aggrieved party.

In an opinion involving a decision of the Davidson County Probate Court, the Court of Appeals of Tennessee declined to allow a resulting trust to be imposed to undo a son’s ownership of an expensive home for which his mother paid almost the entire cost of construction. The opinion provides a helpful analysis of the limitations on a court’s ability to impose a resulting trust to assist a wronged party.

A mother (“Mother”) sold her house in Nashville for a net gain of $395,719. Her son (“Son”) owned a farm in Pegram, Tennessee. Mother moved to the farm and lived with Son in a farmhouse. At the time of Mother’s move, and at all times thereafter, Son was the only owner listed on the deed to the farm. After moving to Son’s farm, Son and Mother signed a construction contract to have a new home constructed on the farm. Both signed the construction contract as owners.

Tennessee Court Finds Fraudulent Conveyance Between Husband and Wife

Published on: November 25, 2013 | by J. Ross Pepper

Collecting a judgment or debt owed from either a husband or wife, but not owed by them jointly, can be difficult, if not impossible. Why so? Jointly owned property, in many circumstances, is not subject to a creditor’s claim against just one of the spouses. Some spouses try to avoid paying debts by transferring property they own individually to the other spouse so that both spouses own the property jointly. When this occurs, it is possible, depending on the facts, that a Tennessee court might declare the transfer to be a fraudulent conveyance (also referred to as a “fraudulent transfer”).

If a transfer is found to be a fraudulent conveyance, a Tennessee court has a range of options to assist a wronged creditor. It might negate the transfer so that the property reverts to the spouse with the debt so that his or her creditors can collect against it. Or, it might order the property sold to satisfy the claim of a creditor. In some circumstances, a court might even enter a money judgment in favor of a creditor and against the spouse which received the fraudulent conveyance.

In a recent fraudulent conveyance case, the Court of Appeals of Tennessee ruled that the transfer of a 27 acre farm by one spouse to the other was a fraudulent conveyance. Here are the facts:

Commercial General Liability Insurance Policies v. Errors and Omissions Policies

Published on: November 18, 2013 | by J. Ross Pepper

The Court of Appeals of Tennessee, in a case involving the litigation of a commercial general liability policy (“CGL policy”), issued an opinion that is helpful for those trying to understand the coverage parameters of commercial general liability policies. Commercial general liability policies are perhaps the most prevalent and common type of policies carried by businesses, but they provide markedly different coverage and protection than do errors and omissions policies (“E & O” policies).

The case involved a financial advisor who had advised some clients to invest in promissory notes. The promissory notes became worthless. The investors sued the estate of the financial advisor (who had passed away by the time the lawsuit was filed). The investment advisor’s business had been covered by a commercial general liability policy issued by Nationwide.

The personal representative of the estate of the investment advisor made a claim against the Nationwide CGL policy. As frequently happens in insurance policy litigation, Nationwide filed a declaratory judgment action in Chancery Court. Nationwide argued that it had no duty to defend the estate of the investment advisor or to provide any coverage for the claimed losses.

In Undue Influence Case, Tennessee Court Holds Marriage Does Not Necessarily Establish Confidential Relationship

Published on: November 11, 2013 | by J. Ross Pepper

In a case with potentially significant ramifications for other undue influence cases, the Court of Appeals of Tennessee ruled that, just because the Wife and Husband were married (for 17 years, no less), that fact did not establish a confidential relationship. Establishing a confidential relationship in undue influence cases is absolutely critical. A transaction, transfer, will, or payable on death designation, etc. can only be set aside based on the legal cause of action of undue influence if there was a confidential relationship between the giver and receiver. Thus, no confidential relationship = no chance of winning on an undue influence claim. (It is not necessary to prove a confidential relationship to set aside a will or transaction if the giver lacked the mental capacity to understand what he or she was doing).

While it is necessary, in an undue influence case, to prove a confidential relationship, once it is proven, a huge advantage is gained by the party seeking to set aside the will, transaction, or beneficiary designation: A legal presumption arises that the receiving party did use undue influence to obtain the benefit which he or she obtained. In such a case, the defendant (who received the benefit) can expect a judge in a Tennessee court to instruct the jury that the transaction is presumed to have been the result of undue influence unless the defendant proves otherwise by clear and convincing evidence.

In Tennessee, a variety of relationships can give rise to a confidential relationship. There are virtually no bright-line rules about what facts do or do not establish a confidential relationship. Tennessee courts have broadly segregated confidential relationships into two categories: (1) legal relationships; and (2) family and other relationships. The most prevalent type of legal confidential relationship arises when a party holds a power of attorney, but such a relationship could arise in other contexts.

Jury Verdict In Favor of Pepper Client in Undue Influence and Breach of Trust Case

Published on: July 22, 2013 | by J. Ross Pepper

On July 18, 2013, a jury in Davidson County, Tennessee returned a verdict for a client of the firm who was represented by attorney J. Ross Pepper. The firm’s client was the defendant (“Defendant”) in an undue influence case. The plaintiff (“Plaintiff”) in the case also alleged that the Defendant had breached his fiduciary duties, committed the tort of conversion with respect to certain funds and bank accounts, and exercised undue influence with respect to beneficiary designations made on his sister’s pension, life insurance policies, and IRA.

The case involved the sister (“Sister”) of the Defendant who passed away in September of 2011. The deceased Sister’s niece, the Plaintiff, alleged that the Defendant had used undue influence to procure an amendment to the Sister’s revocable living trust that made him the exclusive beneficiary of the trust. The Plaintiff also alleged that the Defendant should be held liable for breach of fiduciary duty because he made imprudent investments, and used monies of Sister’s trust for purely personal expenses.

The proof at trial showed that Sister had started the living trust in 2004; amended it in 2006 to provide for a more substantial distribution to her brother, Defendant; amended it in 2009 to reduce her brother’s distribution to the same as it was under the 2004 trust; and, then, amended it again for the last time, about 19 months before her death, to make her brother, the Defendant, the sole beneficiary of the trust (except for certain minor specific bequests totaling about $15,000.00). At Sister’s death, the trust assets were worth close to 1 million dollars.

Uniform Commercial Code: Warranties Under Tennessee Law

Published on: June 21, 2013 | by J. Ross Pepper

If you do business in Nashville, or anywhere else in Tennessee, you might be wise to know something about the warranty provisions of the Uniform Commercial Code (“UCC”). Those warranty provisions are contained in Chapter Two of the UCC, which deals with sales.

When do the warranty provisions of the UCC apply to a sale? They apply only to transactions for the sale of goods. “Goods” are defined, generally, as anything that is movable. What warranties does the UCC create? There are three UCC warranties which potentially could apply to any sale of goods in Tennessee.

EXPRESS WARRANTIES

Why Contracts Must Have Definite Terms

Published on: June 9, 2013 | by J. Ross Pepper

In what should have been an easy win in a breach of contract case, a Tennessee bank went home with a goose egg after the Court of Appeals applied a fundamental rule of Tennessee contract law to the facts of the bank’s case. The case, which was filed in Coffee County, Tennessee, answers the question of why the material terms of contracts should be definite: Because, if they are not definite, the contract will not be enforceable.

The facts of the case are as follows:

• The Bank loaned money to the Defendants

Partitioning Real Estate and Land in Tennessee by Lawsuit: Does the Court Divide It, or Sell It?

Published on: April 30, 2013 | by J. Ross Pepper

In Nashville, as well as all other Tennessee cities and counties, there is plenty of land— commercial, residential, rural, and urban— that is owned by more than one person as tenants in common, also sometimes referred to as “co-tenants.” There can be two tenants in common or more, to a single piece of real estate.

The fundamental distinction of tenants in common is that each has an undivided interest, equal to their ownership share, in the entire piece of real estate. So, if there are two tenants in common, each has an undivided one-half interest in the entire property. Thus, both have the right to use all of the property and to share in the profits made from it, if any. Joint ownership of this nature, not surprisingly, frequently results in conflicts and problems. And, frequently, those conflicts and problems cause one, or more, of the co-tenants to seek the help of a Tennessee court by filing a partition lawsuit.

In Tennessee, the right of a co-tenant to have real estate partitioned is absolute. Tennessee law follows the rule that, if you do not want to continue to have to own property with another co-tenant or co-tenants, you don’t have to do so. If you file a partition action, a Tennessee court must partition the real estate. A Tennessee court cannot deny you your right to get out of your tenancy in common.

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