### IN THE COURT OF APPEALS OF TENNESSEE AT KNOXVILLE January 27, 2005 Se ssion

I N 

### R E 

### : ESTATE OF BILLY F. HAWK, JR.
Appeal from the Chancery Court for Hamilton County No. 02-0723 W. Frank Brown, III, Chancellor

No. E2004-00877-COA-R3-CV - FILED FEBRUARY 28, 2005

This case inv olves a pe

tition file d by

the co-e xecutors o f the Esta

te of Bil ly F. Hawk, Jr. to approve
a sale of r eal esta te partia lly owned by

the Estat e. The iss

ue prese nted is whet her the trial court should have approved the private sale. The trial cou rt held tha t the prop osed sale

was not in t

he best interest of all the beneficiaries of the Estate. The propose d buyer appe als. We hold tha t the trial court’s decision was not contr ary to the prep onderan

ce of ev idence, nor was it

arbitra ry or capr icious, and therefore, affirm the trial cour t’s judgment.

Tenn.R.Civ .P. 3 Appe al as of Right ; Judgme nt of the Cha ncery Co urt Affirm ed; Case Remanded

S HARON G. L EE , J., delivered the opinion of the court , in which C HAR LES D. S USANO , J R . and D. M ICHAEL S WINEY , JJ., joined. Michael E. Richardson, Chattanooga, Tennessee , for Appellant William F. Hawk.

W. Jeffrey Holling sworth and William R. Dearing, Chattanooga, Tenne ssee, for Appellee Estate of Billy F. Ha

wk, Jr. Marvin Berke, Chattanooga, Te nnessee, for Appellee Mega n D. Hawk. StephenM. Goldste in, Chatta nooga, Tenness ee, Atto rney Ad Litem for Appellees, the Minor Beneficiaries of the Estate of B illy F. Hawk, Jr.

OPINION

OnJuly 22, 2002, the co-executors of the Estate of B illy F. Hawk, Jr., (h ereinafter “the Estate”), Sue D. Hawk (the Decedent’s widow), and AmSouth Bank filed a pe tition for approval of the sale of two parcels of real estate. At the time of

the petiti on, the ma

jor asset of the Es tate was a corpor ation nam ed Holida

y B owl, I nc. The p etition al leged a s follows:-2- As executors, the Petitioners hold title to a one-hal f undivided interest in a certain parcel

of real property

of about 101 acres located
near Snow Hill Roadin Hamilton County, Tennessee. Petitioner, Sue D. Hawk, owns the other

one-half undivided interest in this tract. The executor s propose

to sell 12.786 acres from this parcel of about 101
acres. As executors, the Petitioners also ownall of the voting stock and a major ity o f th e non-voting stock of Holiday Bowl, Inc., a Tennessee corporation. Petitioner, Sue D. Hawk, owns all of the remainingoutsta

ndi ng non-voting stock of Holiday Bowl, Inc. Holiday Bowl, Inc. hol ds title to 9 8.5 acre s locate d on Snow Hi ll Road wh ich is adj acent to the parcel of about 101 acre s described above. William F. Hawk, a son of the decedent, desires to purcha se both parc els described ab ove unde r the ter ms and conditions set out inReal Est ate Sales Agreements attached . . . to this Petition. The attached agreements are by

their terms subject to the approval of this Court. The basic terms are that William F. Hawk will purchase the two parcel s for

Nine Hundred Twenty

Thousand Dollars ($920,000), to be paid in

cash at clo sing. The purchase price of the 12.786 acr es is One Hund

red Fif ty T housand D ollars ($150, 000); the purchas e price of the 98.5 acres is Seven Hundred Seve nty Thousand Dollars ($770,000).
* * * Since the executors have voting control over Holiday Bowl, I

nc., they control that corpora

tion ’s ability to sell its assets. As a result, the proposed sale by Holiday Bowl, I nc., is in essence a proposed sale by the Estate.

OnJuly 23, 2002, the trial court appointed a guardian ad litem for the minor parties at interest and any conting ent and unborn beneficiaries of the Estate. The guardian ad litem

filed an answer objecting to the proposed sale. One of the beneficiarie s, Megan D. Hawk, answere d individually and objected to the proposed sale as contrary to her best interest.

OnDecember 4, 2003, the co-executors filed with the court a d ocument s tyle d “Owne

rship Change Notice” which sta

ted as fo llows:

At the time th

is matter was initia

lly filed, Holiday Bowl, I

nc. owned
one of t he trac ts th at is the subject of this proceeding (the tract of about 9 8 acres ) . The corporate stock of Holiday Bowl, Inc. was recent ly sol d. In connection with the sale, a partial stock redemption
was accomplished

inorder to

transfe r owner ship of suc

h proper ty to the shareholders. As a result, the parcel is now owned by the Estate-3- of Billy F. H awk, Jr., as to an 81.25% interest, and Sue D. Hawk as to an 18.75% interest.

The trial court heard the pe ti tion on December 15, 2003. The only persons to testify wer

e Sue D. Ha

wk and Donald L . Tindell, a real e state ap praiser who submitt

ed appra isals of the value of the property pr

oposed to be sold. The trial court ruled that the sale was not in the best interest of all the beneficiaries and di smissed the p etition. William F. Hawk, a son of the decedent, has appealed this decis ion. The c o-execut ors of the Estate have filed an appellee’s brief ar guing that the trial court correctly

decided this case.

Inthis non-ju

ry case, ou r revie w is de novo up on the record of the proceeding s below, but the record comes to u s with a pr

esumption

of corr ectness as to the trial court's factual determinations whichwe must honor unless the evidence preponderates a gainst those findings. Tenn . R. App. P. 13(d); Wrig

ht v. City of Knoxville, 898 S.W.2d 17 7, 181 (Te nn.1995) ; Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn.1993). The trial court's co nclusions o f law, however, are accorded no suchpresumption. Campbell v. Florida Steel Corp., 919 S.W.2d 26, 35 (Tenn.1996); Presley v. Benne tt, 860 S.W.2d 857, 859 (Tenn.1993).

Muchof th e c on tr ov er sy i n t his case centers around Mr. Tindell’s appraisa ls of the two parcel s of real estate. The proposed sale price was the same as the appr aised value. Those opposing the sale argue d that the

co-exec utors, who reques ted and pa id for the appraisals, limited the scope of Mr. Tindell’s appraisals such that the appraised prices of the real estate did not accurately reflect the true market value. They also asserted that the co-executors sho uld have listed and placed the propert y on the open market before acce pting an offer from one of the bene ficiaries of t he Estat e. Mr. Tinde ll testifie d in rele vant par t as follow s: Q: Mr. Tinde ll, wh en yo u were asked to make this appraisal, how did –w ha t sp ec ifi ca lly

did the y as k y ou t o do ? A: Just to value the property as its present use, in its prese nt state. Q: Is that the w ay

you usually make an a

ppraisa l? A: Well, we get asked to make apprai sals for potential use or as developed

or–in this instance it was just to be appraised as its present use, p resent zoni ng. Q: Are most of your a

ppraisals made at

the highest and best use of the pr op er ty? A: A lot of them are, yes, sir. Q: And what is the difference between w hat you do when you make
anappraisal of highest and best use and you make

an appraisal as the property sits now or as it is now pre sently used? A: Well, w e appra

ise prope rty to their po tential us e many times, whichwould be their highest and best use as well as their present use. It’s just all according to how the request is ordered.-4- Q: Okay. If the property

were placed

on the ope

n market , what wou

ld be the standard that y

ou would appraise it for? A: The highest and best use. Q: And that would be the true market value? A: It would be potential market value.

* * * Q: Okay. Now, Mr. Tinde ll, would the beneficiaries benefit from the sale of the land being

opened to the public first to bring a higher price rather than accepting, a

pprovin g an original offer to a be neficiary without fi rst seek ing outsi de buy

ers? A: You would

probably find out f

ai rly quick, op en marke

t typ ically brings the highest price. Mr. Hawk argues that the co-e xecutors were granted broad discretionary

powers under the will to sell property of the e state, and asserts that “the standard of revi ew for the Chancello r in determining [whether

] the sale should be a

pproved , is whethe

r the trus tees hav e exerci se d th e discretiongiven to them under the Will in a reasonable manner.” Mr. H awk relies on the case of Al exander v. Nelson, 82 5 S.W.2d 106 (Tenn.Ct.App. 1991), wherein the court addressed the question of whether the trustee in that case, under the terms of the will, could sell the property at issue to one of the surviving children

for a price substantially

less than fair market value. The Alexand er court stated a s follows:
We think these excerpts from the Tennessee cases state a rule th at is almost universally followed. I

n Bogert on Trusts, 5th Ed., p. 324, the a uthor say s:

In some cases the trust instrument gives the trustee "uncontrolled a nd absolute d iscreti on" to do or refrain from doing ce rtain acts or to decide certain questions. While here the trustee is probably somewha t les s subject to the review and control of the court, the w ords are not given their literal meani ng. It issaid that the trustee must act "in the state of mind contemplated by the testa tor", wh ich would seem to mean he must give some consideration to the fundamental purposes of the trust. Extraordinary dec isions preventing accomplishment

of a primary purpose

of the settlor will not be tolerated. But if the truste e has use d his judgmen t in good faith and has considered the settl or's objectives and

the effect of his action on the beneficiaries, the court will not ove

rturn the trustee' s decisio n and dire ct a diff erent r esult.

* * * While it mi ght be a rgued t hat th e test ator's primary intent wa s to favor his children and kee p h is property in the fa mily, it also must be admitted that the tr

ustee ow ed a duty

to the beneficiaries of

the trust (the heirs). By

the tim e of the events in this record, some of the-5- grandchildren

of the testator had

become the beneficiaries of the trust. We th in k t he y ar e e nt it le d t o b e t re at ed fa ir ly a nd no t a rb it ra ri ly. Alexander v. Nelson, 825 S.W.2d 106, 108 (Tenn.Ct.App. 1991).

We have no disagr

eement w ith Alexander, and agree that it is applicable to the extent it holds that a trustee’s discretion to deal with property of the trust must be exercised reasonab ly, and that all the beneficiaries must be tre ated fa irly and not ar

bitraril y. B ut there

is an addi tional fa ctor in thi s casenot pres en t in Alexander. Regardless of the question of the power and discretion of the coexecutors to dispose of property unde r the will, the parties specifically provided by contra

ct that the sale wou ld be cont ingent u pon the Cha

ncery Court’s a pproval, as follow s: Approval by

Court. This Agreement shall be subject to approval by the Hamilton Co

unty Chancer y Co urt. I f such ap

proval is n o t obtained, then this Agreement shall stand ca nceled without further liability on the part of Buy er or Seller.

Sue D. Hawk testified without contradiction t hat at the ti me her son, William F. Hawk, approached

her with a

n offer to buy the prope rty severa l months af

ter his father’s death, “I to ld him that I felt as though we

could do this. It [Holiday B owl, Inc.] was in need of ca sh access at the time, and so we agreed to do this.”She stated that Holiday B owl, Inc. needed a n infusion of cash to pay
so me outstanding debts. Shortly befor e the hearing of this case, howeve r, the corporate stock of Holiday Bowl was sold. Counsel for the co-executors in closing argument stated, “[c]ircumstances certain ly have changed with the selling of H oliday Bowl. The esta te will candidly admit that if given the opportunity to sign the contra cts today, it would not do so.”

The trial cou

rt, in hold

ing that the propo sed sa le was not in the best interest of all the benefi ciari es, st ated t he fol lowi ng:

Ithink when you put the appra iser in the b ox and say

that he or she can only do one thin

g, that i s, appra

ise it as is inste ad of the

highest and best use, you kind of limit the responses that c an be obtained. Ithink tho se rea sons, plus the fact that no one has given me an explanation yet why

the c ontract on its face shows that Ms. Hawk would receiv e more mo ney

th an the estate for the 12.786 acres, the Court must d

ismiss the petiti on, and th at’s the b asis of my decision. Ithink whe

n yo u put it in my

lap, I ’ve go t to see wh at is in the be st in terest o f all the parties, and those parties include minor benefic iaries. And the Court has an extra special duty, I

think, to look after minor beneficiaries. The duty to which the court alluded was discussed by the Supreme Court in the case of Nashv ille Trust Co. v. Lebeck, 270 S.W.2d 47 0 (Tenn. 1954) as f ollows:-6- Withreference to the disposition of the property of infants a nd lunatics, i.e. the s ale or le ase of such property , the Chancellor stands in loco pare

ntis , Ricardi v. Gaboury , 115 Tenn. 484, 89 S.W. 98, 100, and in authorizing 'the making of a lease of the property of

a mino r', must consider

that which'will be most beneficial to him.' Ricardi v. Ga bo ur y, supra. Re gardle s s of the pleadings, when minors and lunatics are before the cour t, the pro tection o f their pr operty rights
a nd interest s is said to b e 'matt ers of c onscienc e' and

fall'stric tl y within the scope of the Chancellor's extraordinary jurisdiction.' Sec. 8, Bi sp ha m P ri nc ip le s o f E qu it y. Nashville Trust Co. v. Lebeck , 270 S.W.2d 470,475 (Tenn.1954).

We are of t

he opinion

that the tr

ial cour t’s decis ion in this case was within its broad discretion, not arbitrary or capricious, and not contrary to the preponderance of the evidence . We cautionthat this opinion should not be construed as a requirement that an appraiser provide a ny c ertain kind of appraisal in order for a court to approve the sale of real estate by a trust; “[t]h e circumst ances in each ca se must

be considered.” Alexander, 825 S.W.2d 106, 108 (Tenn.Ct.App. 19 91). Under the specific circumstances pre sented by this case, we do not find error in the tria l court’s decision.

The judgment of the trial court dismissing the petition is, therefore, aff irmed. Costs o n appeal are assessed to the Appellant, William F. Hawk.

___________________________________ SHARON G. LEE, JUDGE