Court Reviews Whether a Partnership Existed Between Two Parties

RICHARD SWECKER, et al., v. STEVEN MICHAEL SWECKER, et al., and, DINAH SLUDER, et al., IN RE: ESTATE OF JOSEPH JAMES SWECKER, STEVEN SWECKER, et al., v. RICHARD ALLEN SWECKER (Tenn. Ct. App. January 26, 2011).

Plaintiffs brought this action to establish a partnership with the deceased against the estate's personal representative and others. Defendants answered, denying the allegation that a partnership existed, and filed a counter-complaint, asserting the estate should be reimbursed for plaintiffs' mismanagement of the farm, and for monies the plaintiffs removed from the estate's bank account.

Following an evidentiary hearing, the Trial Court held that deceased and plaintiff had entered into a partnership and that the partnership would be wound up by the Court and the partnership assets distributed. Also, the Trial Court held that plaintiffs would be required to pay rent on the house they occupied on the farm for several years.

On appeal, we affirm the finding that a partnership existed, but reverse the Trial Court's holding that plaintiffs owed the estate rent for occupancy of the house on the farm. We remand, with directions to the Court to wind up the partnership.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2011/sweckerr_012611.pdf

TN Supreme Court Reviews Whether Taxpayer’s Capital Gains were Business Earnings that were Subject to the Excise Tax

BLUE BELL CREAMERIES, LP v. RICHARD ROBERTS, COMMISSIONER, DEPARTMENT OF REVENUE, STATE OF TENNESSEE (Tenn. January 24, 2011).

Taxpayer is a Delaware limited partnership that produces, sells, and distributes ice cream in Tennessee and elsewhere. At issue in this appeal is the Tennessee Department of Revenue's excise tax assessment on capital gains from a one- time stock transaction between Taxpayer and its holding company. Taxpayer sought a refund in chancery court, challenging the validity of the tax assessment on statutory and federal constitutional grounds. Both Taxpayer and the Department moved for summary judgment. The chancery court granted summary judgment to Taxpayer, and the Court of Appeals affirmed the judgment.

Based on the uncontested facts in the record, we hold that Taxpayer's capital gains were business earnings pursuant to the functional test provided in Tennessee Code Annotated section 67-4-2004(1) (Supp. 2000) and therefore subject to the excise tax. Additionally, we hold that the tax assessment was constitutional pursuant to the unitary business principle. We therefore reverse the judgment of the Court of Appeals and enter summary judgment for the Department. We remand to the trial court to determine the amount of excise tax related to Taxpayer's capital gains.

Opinion may be found at:
http://www.tba2.org/tba_files/TSC/2011/bluebell_012411.pdf

Court Reviews Whether A Commercial Landlord Misrepresented the Estimated Operating Expenses to the Tenant-Plaintiff

SOLES4SOULS, INC. v. DONELSON CEDARSTONE ASSOCIATES, LP ET AL. (Tenn. Ct. App. December 20, 2010).

In a landlord-tenant dispute, the tenant plaintiff claims that before the parties entered into a lease for commercial property, the landlord defendants misrepresented estimated operating expenses that the plaintiff was expected to pay as part of its rent pursuant to the lease terms.

The plaintiff appeals the trial court's dismissal of its claims for fraud and violation of the Tennessee Consumer Protection Act. We find that the defendants misrepresented estimated operating expenses after entering into the initial lease with the plaintiff but before entering into an agreement for expansion space.

We therefore reverse the judgment of the trial court on the plaintiff's claims for fraud and violation of the TCPA and remand for determination of an appropriate remedy for damage the plaintiff suffered after agreeing to lease the expansion space.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2010/soles4souls_122010.pdf

TN Supreme Court Reviews Whether a Creditor May Bring a Direct Cause of Action Against an Insolvent Corporation’s Directors and Officers

MICHAEL SANFORD v. WAUGH & COMPANY, INC. ET AL. (Tenn. December 17, 2010)

The primary issue presented in this appeal is whether an individual creditor of an insolvent corporation may bring a direct cause of action for breach of fiduciary duty against the corporate directors and officers.

We hold that a creditor of an insolvent corporation may not bring a direct claim, only a derivative claim, against officers and directors for breach of the fiduciary duties they owe to the corporation.

We adopt the reasoning of the Delaware Supreme Court in North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007), observing that corporate creditors are adequately protected by existing law, and that recognizing a new direct cause of action is unnecessary and would impede corporate governance.

We further hold that the trial court properly excluded evidence of conspiracy to interfere with contract and dismissed the claim for punitive damages. The judgment of the Court of Appeals is reversed.

Opinion available at:
http://www.tba2.org/tba_files/TSC/2010/sanfordm_121710.pdf

TN Supreme Court Reviews A Corporation’s Liability for the Payment of Use Tax

CAO HOLDINGS, INC. v. CHARLES A. TROST, COMMISSIONER OF REVENUE (Tenn. December 15, 2010).

This appeal involves a corporation's liability for the payment of use tax following its purchase of a business jet. After it received an assessment from the Tennessee Department of Revenue for over $700,000, the corporation paid the tax and filed suit in the Chancery Court for Davidson County seeking a refund on the ground that it qualified for the sale for resale exemption under Tenn. Code Ann. section 67-6-102(a) (28)(A) (Supp. 2004) because it had leased the aircraft to another corporation. Both the corporation and the Department filed motions for summary judgment.

The trial court granted the corporation's motion for summary judgment, and the Department appealed. A divided Court of Appeals panel affirmed the trial court. CAO Holdings, Inc. v. Chumley, No. M2008-01679-COA-R3-CV, 2009 WL 1492230 (Tenn. Ct. App. May 27, 2009). We granted the Department's application for permission to appeal.

We have now determined that neither party is entitled to a summary judgment because material disputes exist regarding the factual inferences or conclusions that can be drawn from the facts.

Opinion available at:
http://www.tba2.org/tba_files/TSC/2010/caoholdings_121510.pdf
 
CORRECTION: on page 5, line 25 adds the word "no" between the words "conferred" and "real"
http://www.tba2.org/tba_files/TSC/2011/caoholdings_COR_011311.pdf

Court Reviews Contractual Obligations and Retaliatory Discharge Claims in a Breach of Contract Case

KARIM SKAAN v. FEDERAL EXPRESS CORPORATION, INC. (Tenn. Ct. App. December 14, 2010).

Plaintiff/Appellant filed an action alleging breach of contract and retaliatory discharge. Defendant moved for summary judgment on both claims, and asserted the action was barred by a contractual limitations provision in the application for employment.

The trial court awarded summary judgment to Defendant with respect to the retaliatory discharge claim, and denied summary judgment with respect to Defendant's assertion that the matter was timebarred. Plaintiff appealed.

We dismiss this appeal for failure to appeal a final judgment where the trial court has not entered an order adjudicating or otherwise disposing of Plaintiff's breach of contract claim, and Plaintiff has failed to show cause why this matter should not be dismissed.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2010/skaank_121410.pdf

Court Reviews Whether Plaintiff Proved the Existence of a Partnership for Profit Between the Partie

JOYCE VIA v. LARRY EDWARD OEHLERT, SR. (Tenn. Ct. App. December 10, 2010)

This appeal arises out of a complaint to dissolve a partnership. The plaintiff alleged that she and the defendant, an unmarried couple, acquired real property through joint efforts. She further alleged that she contributed to the improvement of the property and an increase in its value, giving rise to a partnership for profit and a right to a distribution of the partnership's assets following dissolution.

The defendant denied that a partnership existed and counterclaimed for damages and attorney's fees arising out of the plaintiff's refusal to vacate the property following their break-up. At the ensuing bench trial, the defendant moved for a directed verdict on the plaintiff's claims.

The trial court granted the motion and dismissed the plaintiff's claims, specifically finding that the plaintiff was unable to prove the existence of an express or implied partnership for profit between the parties. We affirm.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2010/viaj_121010.pdf

Attorney General Reviews Whether Beer Boards Can Prohibit Sales of Beer through Drive-Up Windows or other Curbside Services

Prohibiting the Sale of Beer Through Drive-Up Windows
TN Attorney General Opinions
Date: 2010-11-19
Opinion Number: 10-113

In this opinion, the Attorney General distinguishes between Class A counties and Class B counties, cities, and towns. Class A counties have the authority to create beer boards and issue beer permits, but do not have the statutory authority to deny beer permits based solely on the sale of beer through drive-up windows, drive-through service, or curb service. Class B counties also have the authority to create beer boards and issue permits, but they have also been granted broad discretion to regulate, restrict, or prohibit beer sales.

Based on these classifications, the Attorney General concludes that while a Class B county (or municipality) would be able to deny permits to applicants who want to sell beer through drive-up windows, this type of restriction could not be imposed by a Class A county's local beer board rule or decision.

The full opinion is available at:
http://www.tba2.org/tba_files/AG/2010/ag_10_113.pdf

Court Reviews Employee's Discharge for Violating Company Policy

ALBERT J. HALE, v. JAMES NEELEY, COMMISSIONER, et al. (Tenn. Ct. App. November 19, 2010)

Claimant, an employee of Wal-Mart, was charged with possession of cocaine and pled guilty to a misdemeanor possession, and was then discharged for violating company policy. Claimant was not at work nor on Wal-Mart's property when the offense occurred.

The agency found that claimant was discharged under disqualifying conditions and denied unemployment benefits. Throughout the appeals process, denial of benefits was upheld.

On appeal to this Court, we hold that claimant violated Wal-Mart's policies by failing to report his conviction under a criminal drug statute to his employer within three days as required under the employer's policy. We affirm the denial of unemployment benefits to claimant.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2010/halea_111910.pdf

Court reviews award of attorney's fees as well as principal and interest amounts of a promissory note.

FIRST PEOPLES BANK OF TENNESSEE v. JAMES L. HILL (Tenn. Ct. App. May 26, 2010)

James L. Hill ("the defendant"), in order to accommodate his son, Shannon Hill, co-signed a note to First Peoples Bank of Tennessee ("the Bank") in the amount of $50,500 ("the small note"). Shannon later approached the Bank about a larger loan for his pizza business. As a consequence, the small note was combined with two other notes. The Bank made a loan in the amount of $294,764.65 under a new note ("the big note") but required a personal guaranty from the defendant as security. Unbeknownst to the Bank, the guaranty Shannon produced was a forgery. Shannon was later killed and, still later, his pizza business defaulted on the big note.

The Bank initially filed this action against the defendant on the sole basis of the guaranty. The Bank later amended its complaint to allege that the big note was a renewal of the small note and that the defendant remained liable on the small note. The primary issue for trial was whether the small note was renewed or whether it was satisfied with the proceeds from the big note.

On the morning of trial, when the Bank's witnesses appeared, the chancellor announced that he was acquainted with several of the Bank's witnesses. The defendant made an oral motion seeking recusal of the chancellor. The court denied the motion and the case proceeded to a bench trial. After trial, the court entered a judgment in favor of the Bank which included the attorney's fees of the Bank. The defendant appeals. The Bank asks for its attorney's fees incurred on appeal.

We affirm that part of the judgment which awards principal and interest, but vacate the award of attorney's fees claimed in the amount of $25,125 and remand for a determination of a reasonable fee. Additionally, we hold that the Bank is entitled, under the note, to recover reasonable attorney's fees incurred on appeal and remand for a determination of a reasonable appellate fee.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2010/firstpeoples_052610.pdf

Court review summary judgment ruling in a tortious intereference cause between two companies

BAILEY TOOL & MANUFACTURING CO. v. FORREST BUTLER ET AL. (Tenn. Ct. App. May 24, 2010)

This is a dispute between two companies that supply parts in the automotive industry. Company A claims that Company B tortiously interfered with its contract and with its business relationships. The trial court granted summary judgment on the grounds that there was no genuine issue of material fact as to causation and that Company B conclusively established the affirmative defense of justification. We affirm the decision of the trial court because Company B negated the element of causation.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2010/baileytool_052410.pdf

Court reviews whether creditor's involvement in the sale of collateral was commercially reasonable

REGIONS BANK v. TRAILER SOURCE, ET AL. (Tenn. Ct. App. May 24, 2010)

A junior creditor sued the senior creditor claiming that the senior creditor's involvement in the sale of collateral, used trailers for tractor-trailer trucks, was commercially unreasonable. We agree with the trial court that the senior creditor, a bank, was subject to the commercially reasonable disposition of collateral rule. However, we hold that the bank's approval of the sale, arranged by the debtor, was not commercially unreasonable. Consequently, we reverse the judgment of the trial court.

Opinion available at:
http://www.tba2.org/tba_files/TCA/2010/regionsbank_052410.pdf

Court reviews whether trial court propery ruled that appellee entities were not partnerships

SHERRY TANNER v. WHITECO, L.P. and ORANGECO, L.P. (Tenn. Ct. App. May 17, 2010)

This case involves the question of whether Appellee entities are partnerships under Tennessee law. Appellant appeals the trial court's order, which found that Appellee entities were not partnerships. Finding no error, we affirm.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2010/tanners_051710.pdf

Court reviews dismissal of action regarding a business's accounting practices

COLE BRYAN HOWELL, III, ET AL. v. CHERYL RYERKERK, ET AL. (Tenn. Ct. App. April 30, 2010)

Cole Bryan Howell, III ("the Grandson"), is the son of Cole Bryan Howell, Jr. ("the Father"), who in turn is the son of Margaret Lyons Howell ("the Grandmother"). The Grandson inherited stock in Howell Nurseries, Inc. ("the Nursery") through the Grandmother's will, which left a block of stock to the Father for life and then to the Father's children.

After the Father's death, the Grandson filed this stockholder's derivative action against all persons who acted as directors of the Nursery and the Nursery itself ("the Defendants"), claiming, in essence, that the directors had sold away all of the corporate assets, leaving him with a rather hollow inheritance.

The trial court held that the Grandson did not have standing to challenge any transactions that preceded the Father's death because it was only after his death that the Grandson became the owner of the stock. The trial court ordered an accounting as to all monies handled after the Father's death, which the Defendants filed with the court. Over the Grandson's objections, the trial court, on the Defendants' motion, approved the accounting and dismissed the case in its entirety. The Grandson appeals. We vacate the judgment of dismissal and remand for further proceedings.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2010/howellc_043010.pdf

Court reviews claim of misrepresentation in a case about a purchase of property

JIMMY E. HOLT ET AL. v. SHAWN R. WILMOTH (Tenn. Ct. App. April 30, 2010)

Shawn R. Wilmoth ("the Buyer") approached Jimmy E. Holt about buying a building Mr. Holt owned jointly with his wife Betty L. Holt (collectively "the Sellers"). The Sellers advised they were only willing to sell the building if they could also sell the inventory from their lamp business that was stored in the building. The Buyer agreed to purchase the building and the inventory. The purchase of the inventory was accomplished through a promissory note in the amount of $250,000. Subsequently, the Buyer paid $150,000 toward the note but refused to pay the balance of $100,000.

The Sellers filed suit to collect the balance owed on the note. In his answer and counterclaim, the Buyer alleged that Sellers represented the value of the goods to be $500,000, but that he only realized $65,000 through liquidation of the goods and that $65,000 was the true value of the inventory. The Buyer alleged that the figure he was given constituted an intentional misrepresentation and, when compared to the amount he recovered from the goods, amounted to a failure of consideration. The Buyer asked to recover damages that included the difference in the amount he paid on the note and the amount he realized out of the liquidation, that difference being $85,000.

After a bench trial, the trial court determined that there was no intentional misrepresentation and dismissed the counterclaim. Nevertheless, the trial court refused to award the Sellers a recovery on the unpaid balance of the note. The court stated that it was leaving the parties where it found them. The Sellers appeal, raising issues; the Buyer, by way of his own issue, challenges the trial court's refusal to award him damages. We reverse and remand the case to the trial court with instructions to enter a judgment in favor of the Sellers and consider their prayer for prejudgment interest.

Opinion may be found at:
http://www.tba2.org/tba_files/TCA/2010/holtj_043010.pdf