WADE HARVEY, EX REL. ALEXIS BREANNA GLADDEN v. CUMBERLAND TRUST AND INVESTMENT COMPANY, ET AL. - Articles

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Posted by: Landry Butler on Oct 30, 2017

Head Comment: Corrected as follows: Page 24, second paragraph, 1st line, "United State Supreme Court" has been changed to "United States Supreme Court"

Court: TN Supreme Court

Attorneys 1:

Mark D. Griffin and Will E. Routt, Memphis, Tennessee, for the appellants, Albert Alexander, Jr., and Wunderlich Securities, Inc.

Attorneys 2:

William Lewis Jenkins, Jr., Dyersburg, Tennessee, and F. Braxton Terry, Morristown, Tennessee, for the appellee, Wade Harvey, Jr., ex rel. Alexis Breanna Gladden.

Judge(s): KIRBY

In this interlocutory appeal, the trustee of a trust executed an investment/brokerage account agreement that included a provision requiring the arbitration of disputes. The trust beneficiary filed a lawsuit asserting claims against the investment broker, and the defendant broker sought to compel arbitration under the arbitration provision in the account agreement. The trial court granted the motion to compel arbitration and granted permission for this interlocutory appeal. The Court of Appeals reversed. On appeal, we are asked to determine whether the signature of the trustee on the account agreement binds the beneficiary of the trust to the predispute arbitration provision. We hold that the Tennessee Uniform Trust Code is intended to give trustees broad authority to fulfill their duties as trustee. We also hold that the Tennessee Uniform Trust Code gives trustees the power to enter into predispute arbitration agreements, so long as doing so is not prohibited under the operative trust instrument. We hold that the trust instrument in this case gives the named trustee broad authority and does not prohibit the trustee from entering into a predispute arbitration agreement. As a result, we interpret the trust instrument as authorizing the trustee to execute the account agreement with the defendant broker, including the predispute arbitration provision therein. Thus, under both the Tennessee Uniform Trust Code and the operative trust instrument, the trustee had authority to enter into the arbitration agreement contained within the account agreement. The question of whether the trust beneficiary in this case is bound by the arbitration provision is governed by the principle that a third party who seeks the benefit of a contract must also bear its burdens. Applying this principle, the trust beneficiary in this case may be bound to arbitrate claims against the investment broker that seek to enforce the account agreement. We reverse the decision of the Court of Appeals and vacate the trial court order compelling arbitration of all claims. We remand the case to the trial court for further proceedings, including a determination as to which if any of the claims asserted by the trust beneficiary seek to enforce the account agreement.