Court reviews whether a guarantor was personally liable for the debt on an open account

AMBER BRAZILIAN EXPORT RESOURCES, INC., DBA AMBER INTERNATIONAL v. CROWN LABORATORIES, INC. ET AL. (Tenn. Ct. App. March 21, 2012)

Amber Brazilian Export Resources, Inc., doing business as Amber International (“the Plaintiff”), filed this action against Crown Laboratories, Inc. and Jeffrey A. Bedard (collectively “the Defendants”) to collect a debt owed on an “open account.” The liability of Mr. Bedard is based upon a personal guaranty of Crown’s obligation. The Defendants admit that something is owed on the account but deny the amount and further deny that Mr. Bedard signed the guaranty in a personal capacity. The Plaintiff filed a motion for summary judgment supported by the affidavit of its president, which the Defendants opposed with the affidavit of Mr. Bedard in which he states that he signed the guaranty in a representative capacity. He also disputes the amount due as stated in the Plaintiff’s affidavit. The trial court granted the Plaintiff’s motion. The Defendants appeal. We affirm that part of the judgment holding Mr. Bedard liable on the guaranty and vacate that part of the judgment setting the amount owed because there is a genuine issue of material fact as to the amount.

Opinion available at:
https://www.tba.org/sites/default/files/amberbrazilian_032112.pdf

Court reviews breach of fiduciary duty, breach of contract, and other issues in a case involving an employee's termination

CYNTHIA H. KOVACS-WHALEY, DIRECTOR AND SHAREHOLDER OF WELLNESS SOLUTIONS, INC. v. WELLNESS SOLUTIONS, INC. ET AL. (Tenn. Ct. App. March 19, 2012)

Plaintiff, an employee, shareholder, and director of Wellness Solutions Inc., filed this action against the Company and shareholders Steven Scesa and Laura Reaves following the termination of Plaintiff’s employment with Wellness Solutions, Inc., asserting a shareholder derivative action and claims for breach of fiduciary duty and duty of good faith.

Following her termination and the initiation of this action, the Company exercised a call option contained within the Shareholders’ Agreement and purchased Plaintiff’s stock. Plaintiff then amended her complaint to include claims for breach of contract and false light invasion of privacy against Mr. Scesa.

The trial court summarily dismissed all of Plaintiff’s claims. We reverse the summary dismissal of Plaintiff’s claim for breach of contract finding there are genuine issues of material fact. We also reverse the summary dismissal of Plaintiff’s claim for false light invasion of privacy finding that Mr. Scesa, as the moving party, failed to negate the essential element of damages or demonstrate that Plaintiff cannot prove the essential element of damages at trial.

We affirm the summary dismissal of Plaintiff’s claims for breach of fiduciary duty, breach of the duty of good faith, and breach of the duty of loyalty upon the finding the Defendants demonstrated that the business judgment rule applies to their decisions at issue, which negates an essential element of each of these claims. Further, we deny Defendants’ request for attorneys’ fees pursuant to Tennessee Code Annotated § 47-56-401(c) upon the finding that Plaintiff did not properly bring a shareholder’s derivative action.

Opinion available here:
https://www.tba.org/sites/default/files/kovacs-whaleyc_031912.pdf

Court reviews a contract dispute involving the refusal to make payments on a delivery

WILSON SPORTING GOODS CO. v. U.S. GOLF & TENNIS CENTERS, INC., ET AL. (Tenn. Ct. App. February 24, 2012)


Wilson Sporting Goods Company brought suit in the Cumberland County General Sessions Court on an open account against U.S. Golf & Tennis Centers, Inc. (“the Company”) and its owners, Arthur H. Bell and Louise Bell (collectively “the Guarantors”). The account resulted from a large shipment of golf balls. After delivery, the Company questioned the price charged and refused and failed to make any payments.

In response to Wilson’s suit, the defendants filed a counterclaim in which they denied owing the amount sought and moved the court to modify or rescind the contract with Wilson. Following a bench trial, the general sessions court entered judgment in favor of Wilson. On appeal to the trial court, both sides sought summary judgment; both motions were denied. After a bench trial, the court entered judgment in favor of Wilson for $33,099.28. The defendants appeal. We affirm.

Opinion available at:
https://www.tba.org/sites/default/files/wilsonsporting_022412.pdf

America Invents: Looking at the New U.S. Patent Act

Sheri Qualters posted a list of the top ten things you should know about the new Patent Act on Law.com. Qualters discusses several aspects of the Act, including the first-to-file model, the PTO court, and changes to the prior use, best mode, and joinder rules.

Read the full article here: Top 10 Things You Should Know About the New Patent Law

The New York Times also posted an article about how the new Patent Act, which was enacted under the name the "America Invents Act," is affecting small businesses. This article also discusses the new-to-the-US First to File model, and it also discusses the Track One "fast track" process and how Postgrant Review works.

Read that article, posted by Eliene Zimmerman, here: Business Owners Adjusting to Overhaul of Patent System

Court reviews whether the final payment in a Development Agreement was contingent upon satisfying certain requirements of a Partnership Agreement.

EAGLES LANDING DEVELOPMENT, LLC. v. EAGLES LANDING APARTMENTS, LP., ET AL. (Tenn. Ct. App. February 2, 2012)

This is a breach of contract case. Following a bench trial, the trial court awarded Appellee Developer the remaining balance due under a Development Agreement that was entered by and between Appellee and the Appellants, a partnership and its limited liability partners, for construction of an apartment complex. Appellants contend that Appellee was not entitled to final payment because the general partner, who is not a party to this appeal, had not funded the development fees that were contemplated under a Partnership Agreement, to which Appellee was not a party. Specifically, Appellants argue that the payment under the Development Agreement is contingent upon satisfaction of the funding requirements specified in the Partnership Agreement. We conclude that the conditions precedent under the Development Agreement were met, and that the Appellee was, therefore, entitled to its full fee under the Development Agreement. The trial court assessed judgment against the limited liability partners and the partnership. Under the Tennessee Revised Uniform Partnership Act, Appellants' status as limited partners protects them from liability for the debts of the partnership. Appellee contends that it is a third-party beneficiary under the Partnership Agreement and may, therefore, have judgment against the limited partners who were parties to that agreement. We conclude that the third-party beneficiary issue is waived and that the trial court erred in entering judgment against the limited partners. Affirmed in part, reversed in part, and remanded.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2012/eagleslanding_020212.pdf

Court reviews whether a landlord unreasonably withheld consent to assign a commercial lease

SHREE KRISHNA, LLC, D/B/A QUIZNO'S CLASSIC SUBS v. BROADMOOR INVESTMENT CORP. (Tenn. Ct. App. February 1, 2012)

This case involves the breach of a commercial lease. The plaintiff leased property from the defendant for a franchise restaurant. The lease granted the plaintiff options to renew for two additional lease periods. The parties' agreement with the franchisor provided that the lease and the options were assignable, and that the landlord's consent to the assignment could not be unreasonably withheld.

The plaintiff sought to assign the lease and the renewal options to a third party. The defendant landlord refused to consent to the assignment and attempted to negotiate a new lease with the prospective assignee on different terms. After the assignee withdrew its offer to purchase the plaintiff's franchise, the plaintiff agreed to sell it to the assignee for a reduced price. The plaintiff then filed this lawsuit against the defendant landlord for breach of contract, alleging that it unreasonably withheld consent to the original proposed assignment. After a bench trial, the trial court held in favor of the plaintiff. The defendant landlord now appeals. We affirm, finding that the evidence supports the trial court's conclusion that the defendant landlord unreasonably withheld consent in order to extract an economic concession or improve the landlord's economic position.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2012/krishnas_020112.pdf

Court reviews whether the assessment of sales and use taxes against an out-of-state Plaintiff violated the Commerce Clause of the U.S. Constitution

SCHOLASTIC BOOK CLUBS, INC. v. REAGAN FARR, COMMISSIONER OF REVENUE, STATE OF TENNESSEE (Tenn. Ct. App. January 30, 2012)

The trial court determined that the Commissioner of Revenue's assessment of sales and use taxes against out-of-state Plaintiff for sales to customers in Tennessee was not permitted under the Commerce Clause of the United States Constitution, and entered judgment in favor of Plaintiff. The Commissioner of Revenue appeals. We reverse and remand.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2012/scholastic_013012.pdf

Dean Ethridge: 8 Reasons to Start a Home-Based Business in 2012

Dean Ethridge discussed Robert Kiyosaki's Business of the 21st Century and 8 benefits and reasons to start your own business this year. Check out the full article at Dean's blog

Knoxville News Sentinel: What to include in your business plan

Bruce Freeman discussed the six essentials of any business plan at the Knoxville News Sentinel's website. Read the story on KnoxNews.com

Jason Fell: How to Raise Money for Your Startup -- Now (Entrepreneur.com)

Jason Fell of Entrepreneur.com has some tips about how to raise money for your startup, including:

- Knowing the different types of investors;
- Making a list of prospective investors; and
- Setting a closing date for investors

Visit their blog for the full article.

Court reviews the value of a party's membership in an LLC

HERBAL INTEGRITY, LLC, ET AL. v. SCOTT HUNTLEY, JR., ET AL. (Tenn. Ct. App. January 12, 2012)

The parties agreed to submit the valuation of Defendants' membership in Plaintiff LLC to arbitration. Following arbitration, Defendants moved to vacate the arbitrator's award. The trial court denied the motion and entered final judgment in the matter. Defendants appeal. We affirm.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2012/huntleys_011212.pdf

Court reviews whether a partnership or a lease relationship existed between two parties

DOUGLAS COFER v. DONNIE HARRIS AND MARCIA HARRIS (Tenn. Ct. App. January 12, 2012)

This case arises from a dispute over an alleged partnership. Douglas Cofer ("Cofer") filed suit in the Chancery Court for Bradley County ("the Trial Court") against Donnie Harris and Marcia Harris ("the Harrises", collectively). Cofer alleged that the Harrises were successors in a partnership established between Cofer and the Harrises' father, Homer Harris, regarding the development of a trailer park on Homer Harris's land.

After a trial, the Trial Court found that, rather than a partnership, a lease relationship existed between the parties. The Trial Court awarded the Harrises damages for unpaid rent. Cofer appeals, raising various issues. The Harrises raise one issue on appeal concerning the calculation of damages. We affirm the judgment of the Trial Court in all respects.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2012/coferd_011212.pdf">http://www.tba2.org/tba_files/TCA/2012/coferd_011212.pdf

TN Supreme Court reviews whether an application for commercial credit contained language sufficient to bind the signer as an individual guarantor

84 LUMBER COMPANY v. R. BRYAN SMITH ET AL. (Tenn. December 12, 2011)

The president of a company signed a commercial credit application. The application contained language immediately above the signature line stating that the individual signing the contract personally guaranteed amounts owed to the vendor. The company defaulted on the balance of the account, and the vendor filed suit against both the company and the president.

The trial court granted summary judgment to the vendor, holding that the president had signed the contract both personally and in a representative capacity. The Court of Appeals reversed, holding that the president had signed the contract only in a representative capacity and granted summary judgment to the president. We hold that the application contained explicit language sufficient to bind the president as an individual guarantor of the contract. We reverse the Court of Appeals.

Opinion available at:
http://www.tba2.org/tba_files/TSC/2011/84lumber_121211.pdf

Center for Entrepreneurship at the Adams Law Firm

Please join our online Center for Entrepreneurship on Facebook. I post information and articles that are useful to entrepreneurs and small business owners.

Here is the link: https://www.facebook.com/#!/groups/193759283865/

Court reviews whether a purchaser of real estate effectively exercised its right to terminate a contract.

CAMERON GENERAL CONTRACTORS, INC. v. KINGSTON PIKE, LLC (Tenn. Ct. App. December 21, 2011)

Cameron General Contractors, Inc., a Nebraska corporation ("Cameron"), sued Kingston Pike, LLC, a Georgia limited liability company ("Kingston Pike"), for breach of a contract concerning the sale of real property located in Knoxville, Tennessee. Prior to trial, Cameron elected to exercise its contractual right to terminate the contract, and the case proceeded to trial on the issue of damages.

After a bench trial, the Trial Court entered its order finding and holding, inter alia, that the contract did not limit Cameron to the return of its earnest money, and granting Cameron a judgment against Kingston Pike for damages in the amount of $872,418.22, plus attorney's fees of $137,656.56. Kingston Pike appeals to this Court.

We find and hold that the contract at issue clearly and unambiguously provides that once Cameron chose to terminate the contract, Cameron's sole remedy for Kingston Pike's breach was a return of Cameron's earnest money deposit. We, therefore, reverse the Trial Court's October 28, 2010 order.

Full opinion available at:
http://www.tba2.org/tba_files/TCA/2011/cameron_122111.pdf