IN THE COURT OF APPEALS OF TENNESSEE

AT NASHVILLE,

June 8, 2022 Session

BARBARA ANN SHELTON ET AL. v. MARY EDEN

Appeal from the Chancery Court for Robertson County

No. CH-18-445; CH-18-446 Laurence M. McMillan, Jr., Chancellor

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No. M2021-01080-COA-R3-CV

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The dispositive issue in this appeal is whether a third promissory note constituted a 

novation of two earlier promissory notes. Following a bench trial, the court found the 

defendant “carried her burden of proof to establish that the third note was a novation and 

cancelation of the previous two notes.” Plaintiffs appealed. We affirm.

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

FRANK G. CLEMENT JR., P.J., M.S., delivered the opinion of the Court, in which ANDY D.

BENNETT and W. NEAL MCBRAYER, JJ., joined.

B. Nathan Hunt and Macayla F. Heath, Clarksville, Tennessee, for the appellants, Peggy J. 

Bunn, Michael S. Farmer, Timothy L. Farmer, Barbara A. Shelton, and Estate of Rudolph 

Scott Farmer.

James B. Johnson, Nashville, Tennessee, for the appellee, Mary F. Eden.

OPINION

FACTS AND PROCEDURAL HISTORY

This is the second appeal in an action among siblings regarding three promissory 

notes allegedly owed to their deceased father. Without the knowledge of the other siblings, 

Mary F. Eden (“Defendant”) and her father, John R. Farmer (“Decedent”), executed three

promissory notes on September 10, 2009; April 7, 2011; and July 31, 2011 (“the First 

Note,” “the Second Note,” and “the Third Note,” respectively).

The terms for the First Note were as follows: Defendant agreed to repay Decedent 

$150,000 plus interest at the rate of 6.00% per annum over a ten-year term in equal 

installments of $1,665.31 due on the first day of each month. The First Note also provided: 

“No modification or waiver of any of the terms of this Agreement shall be allowed unless 

by written agreement signed by both parties.” 

08/17/2022
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The terms for the Second Note, executed on April 7, 2011, were as follows: 

Defendant agreed to repay Decedent $100,000 plus interest at the rate of 5.00% per annum. 

The Second Note was to be paid by equal installments of $1,887.12 on the tenth day of 

each month over a five-year term.

In June 2011 and prior to the execution of the Third Note, Decedent met with his 

attorney, Clyde Richert, Defendant, and her brother, John T. Farmer (“Tom Farmer”), for 

“will and estate planning” purposes.

1 Thereafter, Mr. Richert summarized what was 

discussed in the meeting in a letter addressed to Decedent dated June 28, 2011. Mr. 

Richert’s letter reiterated his recommendation that Decedent and Defendant consolidate 

the September 2009 and April 2011 promissory notes in a third note. The letter states in 

pertinent part: 

I would suggest that any money [Defendant] owed be set up on a new note 

payable in monthly payments for 5 years at prime interest rate, but with the 

payments set lower as if the note was over a longer period. 

On July 31, 2011, the Third Note was executed by both Decedent and Defendant 

with the following terms: Defendant agreed to repay $212,919.562 plus interest at the rate 

of 4.00% per annum. The Third Note was to be paid by equal installments of $2,155.71 on 

the fifteenth day of each month over a ten-year term.3 Notably, Defendant later testified

that, when the Third Note was executed, she did not receive any additional funds from 

Decedent, as she had already received the $212,919.56 that was consolidated into the Third

Note.

Decedent died on October 29, 2015. His Last Will and Testament was admitted to 

probate on November 24, 2015. Defendant and her brother, Tom Farmer, were appointed 

as co-executors of the estate, and all seven of Decedent’s children were named as equal 

beneficiaries of his estate.

A letter with a proposed settlement agreement was sent on January 29, 2016, by Mr. 

Richert to the beneficiaries of Decedent’s estate. The proposal included Defendant’s offer

 

1

It appears that Defendant and Tom Farmer were included in the “will and estate planning” meeting 

because they were named co-executors of Decedent’s estate.

2 Defendant testified that the Third Note was for $212,919.56 instead of $250,000 because 

Decedent reduced the principal balance of the original loans by $38,000 for a vehicle purchase.

3 All three notes were prepared by Angela Chowning, a bank officer with Commerce Union Bank.
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to satisfy the Third Note by paying the estate the outstanding principal balance.

4 Her 

siblings declined the offer.

5 Defendant later satisfied the Third Note by paying the principal 

balance plus accrued interest.

In November 2017, the Estate of John R. Farmer (hereinafter, “the Estate”) filed suit 

against Defendant alleging that she was in breach of the First Note. Then in December 

2017, the Estate commenced a separate action for breach of the Second Note.6

Both the actions were commenced in the Circuit Court for Robertson County and 

subsequently transferred to the Chancery Court for Robertson County. Thereafter, the court 

entered an order permitting five of Decedent’s children—Barbara Shelton, Rudolph 

Farmer, Michael Farmer, Timothy Farmer, and Peggy Duffer (collectively, “Plaintiffs”)—

to be substituted as plaintiffs and allowing the Estate to withdraw from the proceedings. 

The remaining sibling, Tom Farmer, declined to participate in the suit.

Defendant then moved for summary judgment, claiming a novation on the ground 

that the First and Second Notes had merged into the Third Note, which had been satisfied 

in full. Plaintiffs opposed the motion, arguing that each note represented a separate 

obligation. The court granted Defendant’s motion, and the first appeal followed. See

Shelton v. Eden, No. M2019-01295-COA-R3-CV, 2020 WL 3078069 (Tenn. Ct. App. June 

10, 2020).

In the first appeal, this court reversed the grant of summary judgment, finding that 

Defendant had “failed to meet her burden to show that she was entitled to judgment as a 

matter of law.” Id. at *1. Thus, the matter was remanded for an evidentiary hearing. A

bench trial was held on the issue of whether the Third Note novated the First and Second

Notes.

Following the trial, the chancery court determined that Defendant “carried her 

burden of proof to establish that the third note was a novation and cancelation of the 

previous two notes.” In support of this decision, the court made the following findings of 

fact: 

 

4 Plaintiffs contend they were unaware of the First and Second Notes at this time.

5 Shortly thereafter, Defendant and her brother Tom Farmer were replaced as the co-executors of 

the Estate due to a conflict of interest over the question of a novation extinguishing the earlier promissory 

notes.

6 The third promissory note was the subject of another proceeding. See In re Est. of Farmer, No. 

M2019-01335-COA-R3-CV, 2020 WL 1891178 (Tenn. Ct. App. Apr. 16, 2020) (mem. op.).
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a) The transactions at issue in this case are between family 

members;

b) There is not sufficient proof in the record that the Defendant

received funds contemporaneously with the execution of the third note; 

however, there is proof that she received funds when she executed the two 

prior notes;

c) The principal balance owing on the first two notes was 

substantially equal to the obligation contained in the third note;

d) The Defendant testified that she only borrowed $250,000.00 

from her father;

e) Two of the Defendant’s brothers testified that their father told 

them that he had loaned $250,000.00 to the Defendant;

f) The [Decedent’s] longtime accountant testified that [Decedent]

only loaned the Defendant $250,000.00; 

g) The [Decedent’s] personal attorney in correspondence dated 

June 28, 2011 confirmed his conversation with the deceased the previous day 

when he wrote, 

I would suggest any money [Defendant] owed be set up on a 

new note payable in monthly payments for 5 years at prime 

interest rate, but with payments set lower as if the note was 

over a longer period of time. . . . (emphasis added); and,

h) The July 31, 2011 note satisfied the writing requirement 

contained in the September 2009 note.

Based on these facts and circumstances, the trial court held that the Third Note

constituted a novation and dismissed Plaintiffs’ complaints.

This appeal followed.

ISSUES

The issues presented for our review, as we have restated them, are: 

1. Whether the execution of the Third Note constituted a novation of the 

First and Second Notes; and
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2. Whether novation of the First Note was precluded by the provision in the 

note that “[n]o modification or waiver of any terms of this Agreement 

shall be allowed unless by written agreement signed by both parties.”

STANDARD OF REVIEW

“In all actions tried upon the facts without a jury, the court shall find the facts 

specially and shall state separately its conclusions of law and direct the entry of the 

appropriate judgment.” Tenn. R. Civ. P. 52.01. If the trial court makes the required findings 

of fact, “appellate courts review the trial court’s factual findings de novo upon the record, 

accompanied by a presumption of the correctness of the findings, unless the preponderance 

of the evidence is otherwise.” Kelly v. Kelly, 445 S.W.3d 685, 692 (Tenn. 2014). “For the 

evidence to preponderate against a trial court’s finding of fact, it must support another 

finding of fact with greater convincing effect.” State ex rel. Flowers v. Tennessee Trucking 

Ass’n Self Ins. Grp. Tr., 209 S.W.3d 595, 599 (Tenn. Ct. App. 2006) (citations omitted).

While there is no bright-line test to assess the sufficiency of the trial court’s factual 

findings, the general rule is that “the findings of fact must include as much of the subsidiary 

facts as is necessary to disclose to the reviewing court the steps by which the trial court 

reached its ultimate conclusion on each factual issue.” Lovlace v. Copley, 418 S.W.3d 1, 

35 (Tenn. 2013) (quoting 9C Charles Alan Wright & Arthur R. Miller, Federal Practice 

and Procedure § 2579 (3d ed. 1998)).

Our review of a trial court’s determinations on issues of law is de novo, without any 

presumption of correctness. See Lind v. Beaman Dodge, Inc., 356 S.W.3d 889, 895 (Tenn. 

2011).

ANALYSIS

I. NOVATION

“Novation is the substitution of a new obligation for an existing one or the 

substitution of a third party for the existing obligor.” TWB Architects, Inc. v. Braxton, LLC, 

578 S.W.3d 879, 890 (Tenn. 2019) (citing 30 Williston on Contracts § 76:1 (4th ed.) (May 

2019 Update); 58 Am. Jur. 2d Novation § 1 (May 2019 Update) (defining “novation” as “a 

mutual agreement between the parties concerned for the discharge of a valid existing 

obligation by the substitution of a new valid obligation or by the substitution of one debtor 

or of one creditor for another” (footnote omitted))). In Tennessee, our courts use the terms 

“novation” and “substituted contract” synonymously. Id. As our Supreme Court has 

explained in more detail:

The effect of a novation is that the original contract becomes a nullity, and 

the new agreement determines the rights and duties of the parties. The parties 
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cannot revert back to the extinguished contract even if one party later 

breaches the new agreement.

The party seeking to establish a novation must show “(1) a previously valid 

obligation, (2) the agreement of all parties to a new contract, (3) the 

extinguishment of the old contract, and (4) a valid new contract.” The most 

important factor in determining whether a novation has occurred is the intent 

of the parties, which must be clear and definite. 

A novation is never presumed. The party asserting a novation bears the 

burden of proof.

The parties need not express in written form their intent to create a novation, 

and the parties need not state orally or in writing the rescission of the original 

contract. Novation does not require express words such as “novation,” 

“discharge,” “extinguish,” “settlement,” or “release.”

The intent to create a novation may be inferred from the facts and 

circumstances surrounding the transaction and from the conduct of the 

parties. Although the parol evidence rule prohibits the use of extrinsic 

evidence to vary, contradict, or supplement the terms of an integrated 

contract, it is appropriate to consider evidence of surrounding facts and 

circumstances to determine the intent of the parties.

Thus, whether the parties intended a novation is ordinarily a question of fact 

that the trier of fact will determine. The parties’ intent about novation is only 

established, as a matter of law, when the evidence is such that reasonable 

minds cannot differ about the effect of the new agreement.

Id. at 890–92 (footnote omitted) (citations omitted).

In any contract, the “cardinal rule” is to determine the intent of the parties. Pitt v. 

Tyree Org. Ltd., 90 S.W.3d 244, 252 (Tenn. Ct. App. 2002) (citing Bradson Mercantile, 

Inc. v. Crabtree, 1 S.W.3d 648, 652 (Tenn. Ct. App. 1999)). Regarding the intent of the 

parties, Defendant testified that the Third Note was created to replace the previous two 

notes. This establishes the intent of one-half of the parties to create a novation. Because 

Decedent was unavailable to testify, the evidence of Decedent’s intent is limited to the 

“facts and circumstances surrounding the transaction.” See TWB Architects, Inc., 578 

S.W.3d 891. Defendant introduced into evidence a letter from Decedent’s attorney, Mr. 

Richert, who had been Decedent’s attorney for ten years or more. As the letter summarized, 

Mr. Richert recommended that Decedent substitute a “new note” for any money that 

Defendant owed. The Third Note was executed by Decedent and Defendant 33 days later.
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In addition, three witnesses—Tom Farmer, the sibling who is not a party to this 

action; Ervin Brown, Decedent’s accountant; and Defendant—testified that they knew the

aggregate amount Defendant borrowed was $250,000, the total of the two previous notes.

Defendant further testified that she received no additional funds with the execution of the 

Third Note. Plaintiffs offered no proof to contradict these facts.

Moreover, Plaintiffs provided no direct evidence to contradict the letter from Mr. 

Richert or the testimony of Tom Farmer, Mr. Brown, or Defendant concerning Decedent’s 

intent for the Third Note to be substituted for the First and Second Notes. To the contrary, 

Barbara Shelton, one of the plaintiffs, testified that she was “not at all” involved in her

father’s finances and that the only knowledge she had of the notes at issue came from the 

notes themselves, which she did not learn of until after his death. Her sister, Ms. Duffer, 

testified that she never had power of attorney over her father, she had no awareness of her 

father’s “day-to-day finances,” and she was not involved in and had no knowledge of the 

preparation of the promissory notes. Ms. Duffer also testified that she had no knowledge 

about the intention of either party or the facts surrounding the Third Note. Their brother 

Timothy Farmer also admitted that he knew nothing of Decedent’s intent with the 

promissory notes.

However, Tom Farmer testified that his father told him the total amount loaned was 

$250,000:

Q. All right. So your father told you that he loaned her $250,000, 

correct?

A. Yes.

Q. He never told you that he loaned her $462,000, did he, Mr. Farmer?

A. No.

As noted earlier in this opinion, the trial court made specific findings of fact that 

led to its conclusion that a novation had occurred. In pertinent part, the court found: 

a) The transactions at issue in this case are between family 

members;

b) There is not sufficient proof in the record that the Defendant 

received funds contemporaneously with the execution of the third note; 

however, there is proof that she received funds when she executed the two 

prior notes;

c) The principal balance owing on the first two notes was 

substantially equal to the obligation contained in the third note; 
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d) The Defendant testified that she only borrowed $250,000.00 

from her father;

e) Two of the Defendant’s brothers testified that their father told 

them that he had loaned $250,000.00 to the Defendant;

f) The [Decedent’s] longtime accountant testified that the 

deceased only loaned the Defendant $250,000.00;

g) The [Decedent’s] personal attorney in correspondence dated 

June 28, 2011 confirmed his conversation with the deceased the previous day 

when he wrote,

I would suggest any money [Defendant] owed be set up on 

a new note payable in monthly payments for 5 years at 

prime interest rate, but with payments set lower as if the 

note was over a longer period of time. . . . (emphasis 

added) . . . .

As the foregoing reveals, the trial court made more than sufficient findings to 

disclose the steps by which it reached its ultimate conclusion. See Lovlace, 418 S.W.3d at 

35. Moreover, and importantly, having reviewed the transcript of the evidence, we find that 

the evidence does not preponderate against the trial court’s findings of fact that a novation 

had occurred. See Kelly, 445 S.W.3d at 692.

II. WRITING REQUIREMENT

The trial court also concluded that the Third Note satisfied the writing requirement 

contained in the First Note. Plaintiffs contend this was error.

The First Note stated that “[n]o modification or waiver of any terms of this 

Agreement shall be allowed unless by written agreement signed by both parties.” 

“Generally, Tennessee courts follow the rule that ‘allows contracts to be orally modified

even if the contracts specifically state that the contract can only be modified in writing.’”

Lancaster v. Ferrell Paving, Inc., 397 S.W.3d 606, 611 (Tenn. Ct. App. 2011) (quoting

Markow v. Pollock, No. M2008-01720-COA-R3-CV, 2009 WL 4980264, at *8 (Tenn. Ct.

App. Dec. 22, 2009)); see Coop. Stores Co. v. United States Fid. & Guar. Co., 137 Tenn. 

609, 195 S.W. 177, 180 (1917) (“There can be no controversy but that a written contract 

may be modified after it is made by the express words of the parties in writing, as in the 

instant case, as well as by parol.”). So, “[e]ven where the written contract prohibits oral

modifications of the agreement, oral alterations will still be given effect if otherwise valid, 

as ‘men cannot tie their hands or bind their wills so as to disable them from making any

contract allowed by law, and in any mode in which it may be entered into.’” Id. (quoting 
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In re Est. of Nelson, No. W2006-00030-COA-R3-CV, 2007 WL 851265, at *18 (Tenn. Ct. 

App. Mar. 22, 2007)).

“A party’s agreement to a modification need not be express, but may be implied 

from a course of conduct; this is true even where the agreement expressly specifies, as in 

this case, that the parties may only modify the agreement in writing.” Id. at 611–12 (quoting 

Constr. Crane & Tractor, Inc. v. Wirtgen Am., Inc., No. M2009-01131-COA-R3-CV, 2010 

WL 1172224, at *10 (Tenn. Ct. App. Mar. 24, 2010)).

We begin our analysis of this issue by noting that the Third Note satisfies two of the 

modification requirements, those being that the modification be made by “written 

agreement” and be “signed by both parties.” This is because the Third Note is a written 

agreement that was signed by Decedent and Defendant. Further, the intent to modify the 

First Note so that it would be a nullity and replaced by the Third Note is established by the 

same evidence that proved the novation of the First and Second Notes.

As discussed earlier, the letter from Decedent’s long-time attorney, Mr. Richert, 

recommended that Decedent substitute a “new note” for any money that Defendant owed,

and the Third Note was executed by both parties 33 days later. In addition, Tom Farmer, 

Mr. Brown, and Defendant all testified that the aggregate amount borrowed was $250,000, 

the total of the two previous notes, and there is testimony that Defendant received no 

additional funds with the execution of the Third Note. Moreover, Plaintiffs provided no 

direct evidence to contradict Defendant’s evidence of the parties’ intent for the Third Note 

to be substituted for the First and Second Notes. Accordingly, we find no error with the 

trial court’s determination that the writing requirement in the First Note was satisfied.

Based on the foregoing evidence, we affirm the trial court’s determination that the 

Third Note satisfied the writing requirement contained in the First Note. We also conclude 

that reasonable minds cannot differ that the Third Note represented the intent of Decedent 

and Defendant to nullify the obligations in the First and Second Notes and replace them 

with those stated in the Third Note. See TWB Architects, Inc., 578 S.W.3d at 892. As a 

consequence, we affirm the trial court in all respects.

III. ATTORNEYS’ FEES

Although not raised as an “issue,” Defendant contends that Plaintiffs’ appeal is 

frivolous and seeks to recover “just damages” for having to defend against such an appeal. 

Tennessee Code Annotated § 27-1-122 authorizes this court to award such damages against 

the appellant if we determine that the appeal is frivolous or that it was taken solely for 

delay. The statute, however, is to “be ‘interpreted and applied strictly to avoid discouraging 

legitimate appeals.’” Town & Country Jewelers, Inc. v. Trotter, 538 S.W.3d 508, 517 

(Tenn. Ct. App. 2017) (quoting Wakefield v. Longmire, 54 S.W.3d 300, 304 (Tenn. Ct. 

App. 2001)). A frivolous appeal is one that is devoid of merit or has no reasonable chance 

of success. Wakefield, 54 S.W.3d at 304. Although we affirmed the trial court’s ruling, we 
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do not find the appeal to be devoid of merit or rising to the level of a frivolous appeal. 

Accordingly, the request that we impose sanctions is denied.

IN CONCLUSION

The judgment of the trial court is affirmed, and this matter is remanded with costs 

of appeal assessed against Plaintiffs/Appellants, jointly and severally.

________________________________

 FRANK G. CLEMENT JR., P.J., M.S.