# FILED
February 1, 1999 Cecil W. Crowson Appellate Cou rt Clerk IN THE SUPREME COURT OF TENNESSEE AT NASHVILLE

FOR PUBLICA

TION Filed: February 1, 1999 IN RE ESTATE OF FOSTER HUME, III ) ) THE UNIVERS ITY OF THE SO UTH ) DAVIDSONPROBATE ) Appellant, ) ) ) HON. FRANK G. CLEMEN T, JR., Vs. ) JUDGE ) ) MEREDITH KLANK ) ) Appellee. ) No. 01-S-01-9709-PB-00182

For Appellant: For Appellee: J. Richard Lodge, Jr. Norman Gillis E. Clifton Knowles Nashville, Tennessee Bass, Berry & Sims, PLC Nashville, Tennessee John Drummond Nashville, Tennessee



## O P I N I O N

COURT OF APPEALS REVERSED; CASE REMAN DED TO TRIAL C OURT. ANDERSON, C.J.-2- We granted this appeal to determine whether the probate rule of ademption by extinction applies to th e specific bequest of a house, w here the house is sold at foreclosure before the testator’s death and sales proceeds representing the testator’s interest are identifiable after his death.
The trial court, emphasizing the testator’s intent as reflected by the will, concluded that the bequest had not been adeemed because there were pr oceeds remaining from the foreclosure s ale. The foreclosure sale proc eeds were ordered to be distributed to the beneficiary of the specific bequest. The Cour t of Appeals affirmed.

After our review of the r ecord and applicable authorit y, we conclude that the foreclosure of the house prior to the testator’s death resulte d in an ademption by extinctio n of the specific bequest a nd that t he forec losure sa le procee ds should have been distributed to the resi duary beneficiary of the est ate. Accordingly, w

e reverse the judgment of the Court of Appeals and r emand the case to the trial cour t for further proceedings.

BACKGROUND Foster Hume, III, a licens ed attorney, executed a v alid holographic wi ll dated August 1, 1990. In addition to other bequests, Hume specif ically devised his house in Atlanta to his niece, Mered ith Klank (“Klank”), stating in his wi ll, “my Atl. House to

. . . Meredith. (Clank [sic

] I believe).” Hume named the appellant, Universi ty of the South (“University

”), residuary benefici ary.
Hume purchased the Atlanta house i n 1986, subject to a mortgag e in favor of NationsBanc. Hume faithfully made his mortgage payments to NationsBanc until the late summer of 1991. Because of Hume’s del inquency, NationsBanc sold the house at foreclosure before Hume’s death on N ovember 12, 1991.-3- The surplus proceeds of $55,745.07, a fter satisfying the mortgage debt, were paid to the estate’s Execut rix, who took the pos ition that the Atlanta house had been adeemed and that the proceeds should be paid to the University, the residuary beneficiary, and not to Klank, the beneficiary of the specific bequest. Klank, claiming the right to the surplus proceeds, filed an exception to the Executrix’s final accounting in Davidson County Prob

ate Court. The Executrix moved to have her final acc ounting approved.
The Davidson County Pro bate Court denied the Executr ix’s motion and ordered that the proceeds be paid to Klank. Relying on the lac k of proof in the record to indic ate Hume had actual knowledge of the foreclosure proceeding, the court reasoned that Hume had not voluntarily parted with his house and thus must have intended Klank t o receive it, as indic

ated by the will.
The Court of Appeals affirmed the trial court, finding that an ademption by extinction had not occurr ed in this case for two mai n reasons. First, the co urt noted that “Testator’s only contr

ibution to the foreclosure w as his inability or

failure to pay the debt which cannot be presumed to be a voluntary act; and th ere is no evidence that it was deliberate or voluntary.” Second, the Court of Appeals distinguished between cases in which the foreclosure sal e was insufficient to satis fy the debt, where an ademption by extinction would occ

ur, and cases in which the foreclosure sale result ed in surplus proceeds, where an ademption by extinction would not

occur.
We granted the University’s application for permission to ap peal.

ANAL YSIS The only issue presented for our review, whether

the bequest of the Atlanta house has been adeemed by extinction, is purely a question of law; thus, our review is de novo with no presumption of correctness given the judgments of either the trial court-4-

or the Court of Appeals. E.g. , City of Tullahoma v. Bedford C ounty , 938 S.W.2d 408, 412 (Tenn. 1997).
The parties dispute whether the specific bequest was adeemed by the foreclosure sale and whether the testator’s intent is relevant to the issue. N oting that the specific bequest at issue involves Hume’s “Atl[anta] house,” not Hume’s interest in the house, the Universit y argues that the beques t to Klank was adeemed by the foreclosure sale and that ev en if Hume’s intent could be dis cerned from the record, that intent is irrelevant. Conversely, Klank argues both that the Testator’s intention is relevant to the present ca se and that the Testator’s will transferred his int erest in the house, which at the time of his death was represented by the proceeds remaining after the foreclosure sale.
We begin our analysis by noting that ademption is generally defined as “the extinction, alienation, withdrawal, or s atisfaction of the legacy by some act of the testator by which an intention to revoke is indicated: the doing of some act with regard to the subject-matter which interferes with the operation of the will.” E.g. , American Trust & Banking Co. v. Balfour , 138 Tenn. 385, 198 S.W . 70, 71 (Tenn. 1917). Implicit in Tennessee ademption cases is the notion tha t the two parts of this definition each respectively cor

respond to the two types of ademption recognized in Tennes see, ademption by satisfaction and adempti on by extinction. See, e.g. , Rhodes v. Kebke , 179 Tenn. 480, 167 S.W.2d 345 (1943) (ademption by sati sfaction case). The present case involves the i ssue of ademption by extincti on.
Ademption by extinction results because of “the doing of some act with regard to the subject-matter which interferes with the operation of the will.” Balfour , 198 S.W. at 71. In these cases: [t]he rule [of ademption by extinction] prevails without regard to the intention of the testator or the hardship of th e case , and is predicated upon the principle that the subj ect of the gift is annihilated o r its condition-5- so altered that nothing remai ns to which the terms of the beq uest can apply. Wiggins v. Cheatham , 143 Tenn. 406, 225 S.W. 1040, 1041 (1920) (emphasis added) (citation omitted). In other words, it only matters that the subject of the specif ic bequest no longer exists beca use of “the doing of some act;” it is irrelevant w

ho or what initiates “the doing.” Balfour , 198 S.W. at 71.
Ademption by satisfaction, on th e other hand, refers to the situat ion in which the testator “gives in his lifetime to a legatee what he had left him in his will.” Rhodes , 167 S.W.2d at 348. In ademption by satisfaction cases , the testator deals with the legatee in such a way so as to result in an “exti nction, alienation, withdrawal, or satisfacti on of the legacy” during

the testator’s lifetime. Balfour , 198 S.W. at 71. In such cases, the testator’s intent is rel evant to determine whether the testator’s action regarding the legatee “amounts to a withdrawal of the gift from the operation of the will.” Rhodes , 167 S.W.2d at 348. Accordingly, a primar y distinction betw

een ademption by satisfaction cases and ademption by exti nction cases is that the int ent of the testator is relev ant to the former but not to the latter, and that the act of extinction may be the action of anyone.

This rule that the intent of the tes tator is irrelevant

in ademption by extinct ion cases is in harmony w

ith the modern holdings found in the majority of states. E.g. , McGee v. McGee , 413 A.2d 72 (R.I. 1980). In McGee , the Rhode Is land Supreme Court defines the rule and pers uasively analyz es the policy supportin g it. The McGee court stated with respect to the “in specie” tes t: This test focuses on two questions only: (1) whether the gift is a specific legacy and, if it is, (2) whether it is found i n the estate at the time of the testator’s death. The extin ction of the property bequeathed works an ademption regardless of the test ator’s intent.

. . . Moreover, under the pri nciples enunciated by Lor d Thurlow . . . only the fact of change or extinction, not the reason for the cha nge or extinction, is truly relevant. The vast majority of jurisdictions adhere to this rule. This “in specie” theory of adempt ion, although it may occ asionally result in

a-6- failure to effectuate the actual intent of a t estator, has many advantag es. Significant among these adv antages is simplicity

of application, as opposed to ad hoc determination of inte nt from extrinsic evidence in each particul ar case. T his theor y further has the ad vantages o f stabil ity, uniform ity, and pr edictab ility.
Id. at 76-77 (citations omitted). The rule of ademption by extinc tion has been applied in sev eral Tennessee cases similar to the case before us. For example, in Ford v. Cottrell , 141 Tenn. 169, 207 S.W. 734 (Tenn. 1918), the testator specificall y bequeathed certain inte rests in a house which he owned at the time he executed his w ill. Prior to testator

’s death, he sold the house. This Court found that “[a]t the de ath of the [testator] the specific property in question has [sic] been sold . . . and was not, therefore, in existence.” Id. at 737. We held that the specific bequest had been adeemed or extinguished and that the proceeds from the sale of the property during testator’s li

fetime formed part of the general estate. Id.
Just a year earlier, in Balfour , this Court announced “the rule that a specific legacy is adeemed whe n there has been a material alter ation or change in the subj ectmatter, and that the property into which it was converted in such chang e cannot be substituted as or for the specific bequest.” Id. at 71. Th e testat or bequ eathed l ife insurance policy proc

eeds to his daughter. Pri or to his death, the testator collected the cash surrender val ues of the pol icies which he later in vested in real esta te mortgage notes. Applying the rule, this Court held that the specific bequest of the lif e insurance policy proceeds had been adeemed. Id.
Applying the foregoing

rule, we conclude that the specific bequest of the Atlanta property was adeemed in its entirety by the foreclosure sale regardless of Hume’s presumed intentions. Much li ke the specific bequest in Ford , at Hume’s death, “the specific property in question ha[d] been sold . . . and [i]s not, theref ore, in existence.” Id. at 737. The only difference betw een the sale in Ford and the sale in the present-7-

case is the i dentity of t he seller. It is of no si gnificance that a third party and n ot Hume initiated the sale in the pr esent case because, as prev iously stated, the rule

of ademption by extinction applies without regar d to the testator’s intention s. Thus, the foreclosure sale constituted “the doing of some act wit h regard to the subject-mat ter which interferes with the operation of the will.” Balfour , 198 S.W. at 71. Accordingly, in our view, the foreclos ure sale prior to Hume’s death adeemed the specific bequest of the house.

We further conclude th at the proceeds cannot be substituted for the specific bequest of the house because “a specific legacy is adeemed w hen there has been a material alteration or change in the subject-matter, and . . . the prope rty into which it was converted in such change cannot be substituted as or for the specific be quest.” Balfour 198 S.W. at 71. The change in form involved in this case is strik ingly similar to the change in form which r esulted in an ademption by ex tinction in Ford . Just as the proceeds resulting from the sale of the house in Ford formed part of the general estate, Id. at 737, so do the proceeds resul ting from the sale of the house in t he present case. Accordingly, w

e hold that the foreclosure sale resulted in such a “materi al alteration” to the subject matter of the specific bequest so that the proceeds “ cannot be substituted as or for the specific bequest.” Balfour , 198 S.W. at 71.

CONCLUSION We conclude that the testator’s intent is i rrelevant in deciding the question of whether a specific beques t has been adeemed by extinct ion. We further conclude that a foreclosure sale so alter s the form of the specific bequest of a hous e that an ademption by extinction r esults regardless of w

hether identifiable proceeds r emain from the foreclosure sale. We therefore revers e the judgments of the trial cou rt and the Court of Appeals and remand to the trial court for f urther proceedings. Costs of this appeal are taxed to the appell ee.-8- _______________________________ RILEY ANDERSON, CHIEF JUSTICE
Concur: Drowota, Holder, and Barker, JJ.