Court Opinion

ID: 1072570
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:51:15.356263+00
Date Added: 2024-06-11T11:52:46.673320
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                               AT KNOXVILLE
                            February 15, 2001 Session

             TERRY S. HAHN v. THOMAS MARTIN HAHN, ET AL.

                      Appeal from the Chancery Court for Knox County
                       No. 135908-1 Telford Forgety, Jr., Chancellor

                                      FILED MARCH 13, 2001

                                 No. E2000-00330-COA-R3-CV

An intra-family business transaction which occurred nearly 30 years ago fomented this litigation
involving an undisclosed interest in a hotel in Gatlinburg. The original parties are former spouses;
the intervenors are their children. The complaint was dismissed on motion for summary judgment.
We affirm.

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

WILLIAM H. INMAN , SR. J., delivered the opinion of the court, in which HERSCHEL PICKENS FRANKS ,
J, and D. MICHAEL SWINEY, J., joined.

John O. Threadgill, Knoxville, Tennessee, for appellant, Terry S. Hahn

Arthur G. Seymour, Jr. and James E. Wagner, Knoxville, Tennessee, for appellee, Thomas Martin
Hahn.

Wayne Allen Ritchie, Knoxville, Tennessee, for intervening appellees, Mark Hahn, Margot Hahn
Dunn and Scot Hahn.

                                            OPINION

                                         I. The Pleadings

        The plaintiff alleged that in 1966 her father, Herbert Smullian, acquired a “substantial
interest” in the Riverside Hotel which he gave to her before he died in 1970.

        In 1973, the plaintiff alleged that she transferred an “income interest” in the Hotel to her
children and “to evidence that transaction notes were prepared for each of the three children showing
the plaintiff as custodian for those children.”
       She alleged that “some years thereafter” the defendant [her then husband] named himself as
custodian for the children and took complete control of the Hotel including the income it generated.

        The parties were divorced in 1986. Their property settlement agreement made no reference
to the Hotel.1 The plaintiff alleged that the defendant continued to control the Hotel and refused to
provide the plaintiff or the parties’ children an accounting of its income. She seeks to have (1) a
resulting trust impressed, or (2) a constructive trust declared, (3) an accounting of the income
generated by the Hotel, and (4) a recovery of all trust funds.

        The defendant answered that from 1966 to 1972 he was a shareholder of Riverside Motor
Lodge, Inc.; that in 1971 he gave one-sixth of his shares to each of his three children, Scott, DOB
1-3-62, Mark, DOB 9-21-63, and Margot, DOB 6-24-66, by transfer to Terrill Hahn, as custodian
for each child, pursuant to the Uniform Gifts to Minor Act; that in 1972 he gave the remainder of
his stock to his children.

       The defendant denied that the plaintiff ever owned any interest in the Hotel which was the
reason why the Property Settlement Agreement did not address the issue.

        The defendant pleaded the bar of the applicable statue of limitation, laches, and estoppel, the
latter defense being predicated on the allegation that the plaintiff at no time during the divorce
proceedings in 1986 claimed any interest in the Hotel.

                                                 II. The Intervenors

        The children were allowed to intervene pursuant to Rule 24, Tenn. R. Civ. P. They alleged
that each of them had reached majority, and that in the early 1970's they acquired the interest in
Riverside Motor Lodge that is the subject of this litigation. Specifically, they alleged that their
ownership interest was evidenced by transfers of corporate stock.

       In 1973, their corporate shares were sold, the proceeds being represented by promissory notes
payable to their custodian, since each was minor. They alleged that the interest income from the
notes was at all times used for their purposes and benefit by their custodian.

        The intervenors alleged that they have long since reached their majority and that they are the
only individuals who have standing and the legal right to demand an accounting, and that they do
not question, and have never questioned, the use or disposition of the proceeds of the notes. They
further allege that their mother is attempting to re-litigate issues previously determined in the 1986
divorce action, and that her suit should be dismissed.

         1
         Parenthe tically, it should be noted that the Hote l, a corpor ation, was sold in 1973 to Jerry Og le. The pla intiff
admits that she then had no record ownership interest in the Ho tel, which expla ins why the Marital Dissolution
Agreem ent and the d ivorce jud gment, 13 years later, mak e no mentio n of the Ho tel as an asset.

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                                                 III.

       The plaintiff filed an amended complaint joining Morgan Keegan and Company, Inc. as a
defendant. She alleged that this defendant [her former husband’s employer] knew or should have
known that the Riverside funds were held in trust for herself and”the Hahn children,” and that her
former spouse “diverted the funds to his own use, to his profit and to the profit of his employer.”

                                                 IV.

        The plaintiff filed a motion for partial summary judgment alleging that the defendant,
Thomas Hahn, breached his duty with regard to the proceeds from the sale of the Hotel, in that he
utilized these funds for his own purposes.

        She also filed a motion for summary judgment against the intervening plaintiffs [her
children], alleging that they “have no standing to bring this suit because they have not asserted an
interest in the present litigation and because they have no personal knowledge of any interest that
they have in the present litigation.”

                                                  V.

       The defendant, Thomas Hahn, filed a motion for summary judgment alleging that:

               1)      He acquired, with several other purchasers, an interest in the
                       Riverside Hotel in 1966.

               2)      In 1973, the Hotel was sold to Jerry Ogle. At that time, the
                       owners of the corporate stock were (1) Selma Smullian, (2)
                       Terry S. Hahn as custodian for Scott, Mark, and Margot
                       Hahn; (3) W. E. Burnett, (4) Alan Stalcup, (5) Harold Diftler.

               3)      The plaintiff had no interest in the Hotel.

                                                 VI.

         The intervenors filed a motion for summary judgment, alleging that they are the real parties
in interest and are the sole owners of the property [the promissory notes] which is the subject of this
litigation. They allege that while the plaintiff [their mother] claims to have been given an interest
in the Hotel by her father, she has no documentation of such a gift.

       These intervenors further allege that the Deed of Trust executed by the purchaser on February
9, 1973 to secure payment of the deferred purchase price makes no reference of the plaintiff having
an ownership interest, and the property settlement agreement executed by the plaintiff and her
husband in 1986 makes no reference to any ownership interest in the Hotel.

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        They further allege that the plaintiff’s father, Herbert Smullian, bequeathed his ownership
interest in the Hotel to his widow, Selma Smullian, who bequeathed that interest to the intervenors.2

         They attained their majority in 1980, 1981, and 1984, respectively.

       They plead the bar of the applicable Statute of Limitations; they announce their satisfaction
with the management of the property by their father.

                         VII. The Judgment Rendered on September 21, 1999

                  1.       The motions of the plaintiff for summary judgment against
                           the defendant and the intervening plaintiffs were denied.

                  2.       The motion of the intervening plaintiffs for summary
                           judgment was granted. The motion of the defendant for
                           summary judgment was granted.

                                                 VIII. The Issues

        The plaintiff/appellant, hereafter plaintiff, propounds six (6) issues for review, three of which
are directed to the grant of summary judgment, and will be discussed generally. The remaining
issues involve discovery and procedural matters.

                                                    IX. Analysis

        The thrust of the plaintiff’s argument flows from her insistence that her father gave her an
unknown number of corporate shares in the Riverside Hotel, Inc. at some unknown time before his
death in 1970. So far as the record reveals, no stock certificates were issued or transferred to the
plaintiff; no minute entry was made on the books of the corporation about the purported gift; no
documentation of any kind was prepared or executed. The plaintiff does not know the number of
the shares her father purportedly gave to her.

        The Hotel was sold [there were seven stockholders] on February 9, 1973 to Jerry Ogle.
Seven promissory notes were executed, with identical terms, to each of the seven owners. A Deed
of Trust was executed to secure the payment of these notes. The intervenors were minors in 1973
and their notes were payable to the plaintiff as Custodian under the Uniform Gift to Minors Act.
Each note provided for payment of interest only for 12 years, followed by payments of principal and
interest beginning in July 1985.

         2
            This allegation is contrary to the assertion of the defendant, Hahn, that he owned these shares which he gave
to his children in 1971 and 1972.

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         It is not disputed that none of these notes, and none of the sales documents, makes any
reference to Terry S. Hahn as a seller, owner, beneficiary or obligee of any interest in the Riverside.
It is not disputed that the plaintiff produced no documentation of any kind to support her insistence
that her father gave her a portion of his corporate stock in Riverside. It is further not disputed that
after the sale of the Hotel in 1973, the plaintiff received checks from the Hotel corporation made
payable to her as custodian of her children, whom she knew had been given the corporate shares.
It is not disputed that the documentation of the sale of the Hotel to Jerry Ogle in 1970 reveals that
the only members of the Hahn family who had an ownership interest in the Hotel as of February 9,
1973 were Selma Smullian and the intervenors. The plaintiff was not mentioned.

       By 1985, the intervenors had obtained their majority. In 1986, the plaintiff and defendant,
Thomas Hahn, were divorced. As already noted, their Marital Dissolution Agreement contains no
reference whatever to the Hotel. Significantly, the Marital Dissolution Agreement provides:

               Husband and wife expressly certify that they have entered into the
               Agreement upon mutual consideration and with a full disclosure of
               the assets of the parties. Consent to the execution of this Settlement
               Agreement has not been obtained by duress, fraud, or influence of any
               person.

         The Hahn children were 38, 37, and 34 years old, respectively, when this complaint was filed.
The record reflects that they intervened in this action to declare their satisfaction with the
management of their funds by their father, and to persuade the court of their belief that only they
have standing to question or challenge the management of their money. They are supportive of the
argument that the complaint filed against their father is an effort on the part of their mother to re-
litigate issues previously determined in the 1986 divorce action.

        The Chancellor ruled that the notes in question, executed in 1973, “were 24 years old by the
time this lawsuit was filed, far beyond any statute of limitation.” We agree. Any delimiting statute
would have expired more than 20 years ago. See, Tennessee Code Annotated § 48-2-122:
Tennessee Code Annotated § 28-3-109. To escape the bar of any delimiting statute of limitations
the plaintiff argues that she did not discover her cause of action until 1997. The facts admitted by
the plaintiff do not support this argument. The Hotel was sold in 1973 and the notes were payable
to the plaintiff as custodian for her children. Further, in 1988 she was aware that payments on the
notes were being made to her former husband as Custodian of their children.

                                                  X.

        While we believe any theory of action is clearly time-barred, it is appropriate to note that the
plaintiff claims to have received an interest in the Hotel from her father. There is no documentation
evidencing any transfer of ownership, and the plaintiff admits that she does not know what interest
her father owned in the Hotel. She also admits that she does not know the number of shares
allegedly given to her. This testimony falls far short of satisfying the recognized rule that to

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constitute a completed gift the intent of the donor must be shown and the intention must be
accompanied by delivery. Arnoult v. Griffin, 490 S.W.2d 701 (Tenn. 1972); Victory v. Victory, 399
S.W.2d 332 (Tenn. App. 1965). While we are not, per se, concerned with the validity of a gift, the
relevance of the plaintiff’s alleged ownership of a specific number of shares of the incorporated
Hotel seems obvious.

                                                   XI.

        The plaintiff argues that summary judgment was inappropriate because she was not accorded
an adequate time for discovery. Her complaint was filed October 3, 1997. On February 26, 1999,
an Order was entered that included a discovery cut off as of May 15, 1999. The plaintiff’s motion
seeking additional time for discovery was filed on June 23, 1999. Neither her motion nor the
attached affidavit identifies any witness to be deposed and upon the hearing of the motion for
summary judgment the issue of additional time for discovery was not mentioned. Discovery matters
are discretionary, and we cannot find the Chancellor abused his discretion in denying the request for
additional time. Roberts v. Blount Memorial Hospital, 963 S.W.2d 744 (Ct. App. 1997).

                                                  XII.

        Moreover, the plaintiff has no standing whatever to maintain this action, however obliquely,
on behalf of her sui juris children. When the plaintiff and defendant were divorced in 1986, each
child was more than eighteen years of age and each had the untrammelled legal right to control the
disposition of the proceeds of the promissory note payable to him/her. This issue is not briefed. We
allude to it because of its obviousness and will not further notice it.

                                                  XIII.

        The plaintiff next argues that the court erred (1) when it declined to strike the defendants late-
filed answers to her request for admissions, and (2) in setting aside a default judgment, and (3) in
declining to enlarge the time within which to conduct discovery. These are all matters involving
discretion. With regard to the late-filed answers to the plaintiff’s request for admissions, the
Chancellor conducted a hearing on the issue, and there is no transcript of this hearing. We must
assume the sufficiency of the evidence on the point. Sherrod v. Wix, 849 S.W.2d 780 (Tenn. App.
1992).

        A default judgment was entered on a discovery sanction, which the Chancellor set aside, on
motion and hearing. There is no transcript of this hearing, and we must assume the sufficiency of
the evidence on the point. Sherrod v. Wix, supra. In any event, the Chancellor’s discretion will not
be disturbed on appeal unless abuse of discretion is clearly shown. Yearwood, Johnson v. Foxland
Development Venture, 828 S.W.2d 412 (Tenn. App. 1992). We find no abuse of discretion.

                                                  -6-
                                                 XIV.

        The plaintiff complains of the action of the Chancellor in ordering her to remit $17,368.01
to her children.

        The promissory notes were executed by Riverside Motor Lodge, Inc. In 1998, this obligor
was importuned to pay the installments directly to the plaintiff, apparently upon the representation
that she would receive these funds as custodian, notwithstanding that her children were then more
than 30 years old.

        The plaintiff deposited these funds to her personal account, failed to remit any portion thereof
to her children and made no accounting. She nevertheless concedes that she retained these funds as
a fiduciary. No satisfactory reason is advanced to justify her retention of the funds owned by her
children and the point need not be further labored.

        The judgment is affirmed at the costs of the appellant.

                                                        __________________________________
                                                        WILLIAM H. INMAN, SENIOR JUDGE

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