Ethel Rogers Smith executed a will in 1991, stipulating that her assets would go to her husband if he survived her, and if not, would be divided equally between her two sons, Charles and Jerry Smith. After her husband's death, Ethel appointed Jerry as her attorney-in-fact through a Durable Power of Attorney with a Springing Clause in 1994, which required a doctor’s certification of her disability or incapacity to become effective. However, there was no evidence of such certification. Following her move to a retirement community and later to a nursing home, Jerry frequently visited Ethel, assisting her with daily tasks. Ethel decided to sell her house, and Jerry signed the sale documents at her request, claiming to act as her attorney-in-fact. The proceeds of the sale were deposited into a joint account with Jerry's name. The Trial Court found no confidential relationship or undue influence exerted by Jerry over Ethel. Charles, as the executor, appealed the findings, leading to a partial affirmation and reversal of the Trial Court's decision by the Court of Appeals, which remanded the case for further proceedings.
Ethel and Jerry Smith established a joint tenancy account at SunTrust Securities, Inc. with funds from a matured certificate of deposit, totaling approximately $210,000, which became the majority of Ethel's assets at her death. Ethel's power of attorney was never activated due to a lack of physician certification of her incapacity, despite both parties treating it as effective. Jerry, with Ethel's knowledge, used the power of attorney to sign various documents, including those for selling Ethel's house and applying for Medicaid. However, he failed to disclose the SunTrust account in the Medicaid application, believing it would not count because his name was on it.
Ethel had a good relationship with Jerry, but her relationship with her other son, Charles, was strained, culminating in family conflicts and Ethel’s expressed desire that Charles and his wife not inherit from her estate. Ethel passed away on February 3, 2000. At trial, Reverend Griffin, Ethel's pastor, was called to testify, but objections were raised regarding confidential communications. The court allowed him to determine the scope of his responses based on clergy-penitent privilege.
The appellant raises several issues on appeal, questioning whether the trial court erred in concluding that no confidential relationship existed between Ethel and Jerry, whether undue influence was present in establishing the SunTrust account, whether the court ignored alleged fraud in Jerry’s Medicaid application, whether it improperly instructed the witness regarding clergy confidentiality, and whether it correctly determined the creation of the joint tenancy with right of survivorship.
The review of the trial court's findings is conducted de novo and carries a presumption of correctness regarding factual findings unless the evidence suggests otherwise. Legal conclusions are reviewed without such a presumption. The court examines whether a confidential relationship existed between Jerry Smith and his mother, Ethel Rogers Smith, a determination of fact that warrants deference to the trial court's findings. However, the evidence indicates a preponderance against the trial court's conclusion that no confidential relationship existed, leading to a reversal on this point.
In Tennessee law, a confidential relationship arises when one party holds dominion over another, typically creating a presumption of undue influence when a dominant party benefits from the weaker party. The burden of proof lies with the party asserting the existence of this relationship. While a parent-child relationship alone does not establish a confidential relationship, granting an unrestricted power of attorney does. In this case, although Ethel's power of attorney was not in effect due to her lack of certification as disabled, the parties behaved as if it were operative. Jerry acted as Ethel’s attorney-in-fact, indicating a confidential relationship existed.
The court will now consider whether the trial court erred in not finding that Jerry Smith exercised undue influence over Ethel regarding the acquisition of an account at SunTrust Securities, as the recognition of the confidential relationship alters the burden of proof in this case.
Jerry Smith, as the dominant party in a confidential relationship, benefited from a joint tenancy with right of survivorship on a SunTrust account funded by the sale of his mother Ethel's house, leading to a presumption of undue influence. The case is remanded to the Trial Court to assess whether Jerry can rebut this presumption with clear and convincing evidence regarding the fairness of the transaction. The Court also considered allegations of fraud related to a Medicaid application filed for Ethel, affirming that the Trial Court's credibility determinations of witnesses should be respected, as the evidence does not contradict its findings. Regarding a claimed error in jury instructions on clergy/penitent privilege, the Court found no reversible error due to the absence of an offer of proof about the excluded evidence. Additionally, the Court ruled that the issue of joint tenancy was not tried by implied consent, as evidence relevant to it was also necessary for other pleaded issues. The Court reversed the Trial Court's finding of no confidential relationship and remanded for further proceedings on the undue influence presumption, while affirming the remaining judgments. Costs on appeal are assigned to Jerry Smith.
