M r

. W a r l i c k d i d n o t r e p r e s e n t t h e a p p e l l a n t s a t t h e t r i a l b e l o w. 1 

### IN THE COURT OF APP EALS OF TENNESS EE AT JAC KSON Se pte mb er

17, 200 8 S es sio n
COLE MAN MANAGEMENT, I NC.

v. DAVID MEYER, J AMES W. RAYNER, RICH ARD D. BAKER,

ROSE Mc KEE , AND 

### NC F A SSOC IATE S
An Appeal from the C ircuit Court f or Shelby Coun ty No. CT-001289-02 R ita L. Stotts, Judge

No. W2007-02497-C OA-R3-C V - Filed April 22, 2009

This is a n action to r ecove r a rea l e state commission. The defe ndants are the gene ral pa rtners of a partne rship that owned a single asset, an a

partment c omplex

. In 1 9 9 2, the partnership filed a
re or ga niz a tio n p e tit ionin b a nk ru ptc y. Th e pa

rt ne rs hip hir e d th e plaint if f re a l est a te a ge nc y to se ll the apa rtment complex wh i l e i t wa s i n bankruptc y. After a hea ring to establish the value of the property, the bankruptcy court pe rmitted the partne rship to buy back the pr operty for $9.8 milli on. Soon after the bankruptc y plan was confirme d, howeve r, the pa rtnership, through the pla intiff rea l estate a gency, c ontrac ted to sell the property to a third party for $12.5 milli on. Upon discovering thi s, theba nk

ru ptc y c ou rt

pe rm itt e d the sa le to the thi rd pa rty to tak e pla c e fo r $ 12 .5 mil lio n, bu t it order ed that the e xcess pr ocee ds of the sale be plac ed in esc row. Wh en t he esc row funds w ere rele ased, the plaintiff re al estate agenc y did not rece ive its c ommissi on on the sale of the prope rty. Con se qu e ntl y, the real es ta te a ge nc y f ile d th is l a ws uit

a ga ins t th e ge ne ra l pa

rt ne rs to r e c ov e r i ts commission. The defe ndants filed a motion to dismiss based on the statute of limitations and on the equitable doc trine of “uncle an hands.” The trial c ourt denied the motion and awar ded the plaintiff
re a l e state a ge nc y the c omm iss ion so ug ht plu s pre jud gme nt int e re st. Th e de fe nd a nts no w a pp e a l. W e a ff ir m, f ind ing that th e la ws uit wa s ti me ly f ile d, that th e tria l c ou rt

didno t e rr

in d e c lin ing to apply t he u n c le a n h a n d s d o c trin e , a n d th a t th e tria l c o u r t d idn o t a b u s e it s d is c r e ti o n ina w ar d ing pr e jud gme nt i nte re st. Tenn. R. App . P. 3 Appeal as of Right; Judgment of the Cir cuit Court is Aff irme d

H OL LY M. K I RBY , J., d elivere d the opinion of the Court, in which D AVI D R. F ARMER , J. , a ndJ. S TE VE N S TA FF O RD , J., joined.

Dan W arlick, N ashville, Tenne ssee, for the Defe ndant/Appellants, Da vid Meyer, James W. Rayne r, 1 Ric ha rdD. Bake r, Ros e Mc Ke e , a ndNC F As so c ia te s.T h e b a c k g ro u n d fa c ts o f th is c a se a re d e sc rib e d in m o re d e ta il in th e d e c isio n iss u e d b y th e B a n k ru p tc y C o u rt, 2
F i rst U n i o n N a t ’l B a n k v. T en n -F la P a rt n ers (In re T en n -F la P a rt n ers ) , 170 B. R. 946 ( Bankr

. W

. D

. Tenn. 1994) , a nd th e a p p e llate c o u rts in v o lv e d in th e c a se , 2 2 6 F .3 d 7 4 6 (6 C ir. 2 0 0 0 ); 2 2 9 B .R . 7 2 0 (W .D . T e n n . 1 9 9 9 ). th

T h e a m e n d e d d isc lo su re sta te m e n t file d in th e b a n k ru p tc y c o u rt a sse rte d th a t t h e g e n e ra l p a rtn e rs o f T e n n -F la 3
h a d c o n trib u te d a n d in v e ste d $ 8 .6 m ill io n in th e L a k e sid e p ro p e rty

. -2- John S. Golwen, Kristen C. Wright, an d T iffany A . Yates, Me mphis, Tennessee , for the Plaintiff/Appellee, Coleman Manageme nt, Inc.

OP IN ION

F ACT S AND P R O C EE D ING S B E L OW

Def en d an t s / Ap p el l an t s Da v i d M ey er , J am es W. R ay n er , R i ch ar d D. Baker , Rose McKe e, and NCF Associates wer e the gener al partne rs of Tenn- Fla Partners (“ Tenn-Fla” ). The only a sset owned by Te nn -F la

wa s an ap art me nt co mpl e x in O rl a nd o, Flo ri da , kno wn a s L ake sid e No rth at A ltamon te Mall (“the L akeside property ”)

. The issue in this case is whether Plaintiff/Appe llee Coleman Manage ment, Inc. ( “Coleman Mana gement”) , a real estate agenc y, through the efforts of its owner, Har ry Ray Coleman (“ Mr. Coleman”) , is entitled to a commission on t h e sale of the Lakeside property that took place shortly af ter Te nn-Fla filed for

chapte r 11 bankr

uptcy protec tion.

A. Back ground

2

Te nn -F la a c qu ir e d th e La

ke sid e pr op e rty in 1984 fo r a pur c ha se pric e of abo ut $ 5 mi lli on in
c a sh a ndthe a ssu mpt ionof $1 2. 7 in deb t. In No ve mbe r 1 98 9, Te nn -F la re fi na nc e d th e fi rs t mortgage on the property through tax-exe mpt bond financing i ssued by t he Florida Housing Finance Agenc y. First Union National Bank of Florid a (“First Union”) bec ame the tr ustee for the holders of the publicly trade d bonds (“bondholder s”). The bonds were in the amo u n t o f $12,685,000. There afte r, i n t h e wake of a ge nera l economic downturn in the Orlando r eal e state marke t, the ge ne ra l pa

rt ne rs of Te nn -F la

pe rs on a lly bo rr ow e d $ 2. 5 mi lli on fr om F ir st T e nn e sse e Ba nk in Me mph is, Te nn e sse e , w hic h w a s c on tr ibu te d to wa rd s T e nn -F la ’s op e ratio na l e xp e ns e s. 3

Tenn-Fla f

ound itself forc ed to contemplate bankruptc y. On July 1, 1992, Tenn-Fla e xecute d
a ma na ge me nt a gr e e me nt w ith Col e ma n Man a ge me nt to m a na ge the La ke sid e pr op e rty a ndto s e ll it in bankruptcy. In that a gree ment, Tenn-Fla a gre e d to pay Coleman Mana gement a 2% commission upon the completion of the sa le of the La keside prope rty.

On J uly 17, 1992, Tenn-Fla filed a chapte r 11 re organiz ation petition in the United States Bankruptcy Court for

the We stern Dist rict of Tenne ssee (“Bankruptc y Court”). The schedule s filed by Tenn-Fla in the bankruptcy proce edings listed the Lakeside prope rty as its only substantial assetT e n n -F la p la c e d a “ q u ic k sa le ” li q u id a tio n v a lu e o n th e p ro p e rty o f $ 6 m ill io n

. In re T en n -F la P a rt n ers , 170 4
B. R. a t 952.
-3- and assigned the proper

ty an estimated fair marke t value of $8.5 milli on. Tenn-Fla authorized Mr

. 4 Col e ma n to a c t onbe ha lf

of the pa rt ne rs hip in the ba nk

ru ptc y p ro c e e din gs , in c lud ing theauth ority to sign the bankruptcy pe tition, di sclosure state ments, and re organiz ation plans. See First Union Na t’ l Ba nk v . T

e nn- Fla Pa rtne rs (

In re T e nn- Fla Pa rtne rs) , 170 B.R. 946, 950 (Bankr. W.D. Tenn. 1994).

Before confirming the reor ganization plan, the Bankruptcy Court held a hearing to determine the value of

the Lake side property. After the contested he arin g , t h e Bankruptc y Court valued the property at $9.1 milli on. At the conf irmation hearing he ld shortly ther eaf ter in January 1994, T ennFla , a s th e de bto r i n p osses si on , a gr e e d to pay $ 9, 88 5, 00 0 to pu rc ha se thebo nd s a nde ff e c tiv e ly repur chase the prope rty. This was later char acte rize d by the Bankruptcy Court a s Tenn-Fla’s agre ement “t o p ay $9,885,000 (about $350,000 of w hich would go to First Union as part of a n a dmi nis tr a tiv e c la im) fo r the pr op e rty a ndbo nd s. Th is r e su lte d ina n a pp ro xim a te 75 % r e c ov e ry to the bondholders, with the shortf all being dischar ged.” Tenn-Fl a P a r tners v. First Union Nat’l Bank(I n re Te nn- Fla Pa rtne rs) , 2 29 B.R . 7 20 , 7 25 (W.D. Ten n. 19 99 ). As a re su lt, thefi rs t mortgage bondholde rs, secur ed in the approximate amount of $12,685,000, ac cepte d the plan and agre ed to “write off” some $3.15 milli on of the first mortgage principal. The Bankr uptcy Court’s confirmation order is date d January 21, 1994.

On Fe br ua ry 2, 19 94 , les s tha n two we e ks a ft e r the e ntry of the c on fi rm a tio n o rd e r, Te nn -F la enter ed into a sale s contrac t with a rea l estate investment trust, U nited Dominion, in which U nited Dominion agree d to purcha se the bonds and the La keside prope rty from Te nn-Fla for $12,443,547. As described by the Bankruptc y Court, the sale to Uni t ed Do m i n i o n would have r esulted in “a n appar ent net re covery to the debtor of approximate ly $2,500,000 over the amounts nece ssary to pay the bondholders and other c reditors unde r the plan.” In r e Te nn- Fla Pa rtne rs , 170 B.R. at 951.

On Marc h 3, 1994, First Union, as t rustee for the bondholders, filed an adversary proce eding in Bankruptcy Court see king revoc ation of the Janua ry 1994 conf

irmation order , damage s for bre ach of fiducia ry duty by T enn-Fla a nd/or the gene ral pa rtners, and the impositi on of a lien or constructive trust on the exce ss proce eds fr om Tenn-Fla’s sa le of the La keside proper t y

. “At the he art of the complaint [wa s] t he allegation that the debtor obtained the order of confirmation by fraud . . . .” Id.
a t 94 9. F ir st U nio n a

rg ue d th a t T e nn -F la

kn e w the pr op e rty’ s tr

ue va lue a ndun de r- re pr e se nte d it
a t th e ba nk

ru ptc y c on fi rm a tio n pro c e e din g so tha t the ge ne ra l partne rs c ou ld ke e p the pr oc e e ds in
exce ss of $9,885,000 from the anticipated sale to United Dominion.

The Bankr

uptcy Court permitted Tenn- Fla to proceed wi t h t h e sale of the bonds and the Lake side property to United D ominion. Tenn-Fla was also permitted to use the proc eeds f rom the sal e t o make c erta in distributi ons require d under the reor ganization plan. Howeve r, the Court require d Tenn-Fla to put the re maining proce eds from the sa le in escr ow pending a de termination of First Union’s claim as trustee . The Bankr uptcy Court’s orde r, date d April 1, 1994, stated:T he B ankrupt cy C ou r t ’ s deci s i on t o deny c om pensat ory dam ages t o Fi r s t U ni on w as r ever s ed by t he di s t r i ct 5

c o u rt. S ee In re T en n -F la P a rt n ers , 2 2 9 B .R . at 7 3 7 -3 8

. -4- The pa rties have agre ed to proc ee d wi t h t he closing of the Contra ct betwe en the Debtor and United Domi nion and have agre ed that all exc ess proc eeds a bove norma l closing expense s require d by the Contract to be paid by Debtor a s seller (w hich
no rm a l e xp e ns e s in c lud e bu t a re no t limite d to De bto r’ s atto rn e y f e e s in c ur re d w ith respe ct to the Contract) and funds ne cessa ry to pay or discharge the claims of Classes 4, 5, 6 and 7 as pr ovided in the Debto r’ s plan. All such exc ess proc eeds shall be pla c e d in a n inte re st b e ari ng e sc ro w a c c ou nt .

. . pe nd ing fu rthe r O rd e r o f this Cou rt

. See Exhibit 6. The sale of the Lake side property to United D ominion occurre d on April 14, 1995. Ac c or din g to theSe lle r’ s Se ttl e me nt Sta te me nt, a re a l est a te c omm iss ionof $1 34 ,5 00 wa s p a id t o the purc haser ’s re al estate agent, Robert Sm i t h (“ M r. S mith”) at closing. Howe ver, the $142,000 commission from the sale to the seller ’s re al estate agent, Mr. Colema n, was put in escr ow.

InMay 1 99 4, theBa nk

ru ptc y Co urt ha d a

tria l on Firs t Unio n’ s complaint a ga ins t T e nn -F la and its partner s. After

the t rial, t he Bankruptc y Court made exte nsive findings of fa ct and c oncluded that Tenn-Fla ha d committed fraud upon the court in misrepre senting the true va lue of the La keside property. In r

e Te nn- Fla Pa rtne rs , 170 B.R. at 967-68. The Bankruptc y Court found that TennFla, through Mr. Coleman, had ne gotiated with United Dominion and other pote ntial pur chase rs for
a sa le s p ri c e fa

r i n e xc e ss o f the $9 .1 mil lio n va lue pla c e d on the pr op e rty by th e Ba nk ru ptc y Co urt, and fa r in exc ess of the $9,885,000 Te nn-Fla was to pay to pur chase the bonds and re purcha se the property. At the same t i m e, T enn-Fla failed to disclose its negotiations with t hese pote ntial purcha sers to First Union, ot h er cr edit ors, or the Bankr uptcy Court. Although Mr. Coleman’s attorney ha d advised him to disclose any such offe rs to the Bankruptcy Court, he did not do so. In fa c t, h e tol d p ote nti a l bu ye rs no t to make of fe rs wh ile the pr op e rty w a s in ba nk ru ptc y, “ de lib e rate ly put[ting] off the r ece ipt of actua l offer s until after the c onfirmation of [the ] plan.” Id. at 952-53. The Bankruptcy Court surmised:

Tenn-Fla de liberate ly s t al l ed p u rc h as er s , co n ce al ed t h ati n fo rm ation, and repurcha sed the pa rt ne rs ’ equ it y in ter e st at a sh arp dis c ou nt, kn ow ing that it wo uldbe able imm e diate ly t o r e se ll the pr op e rty w ithe no ug h r ecov e ry to s a tis fy thepa rt ne rs ’ persona l exposure to First Tenne ssee Bank. This wa s the debtor’ s acknow ledged goal, and it would have acc omplishe d i t t o t h e los s of the sec ured c reditors but for this adversa

ry proc eeding.

Id. at 968. On the basis of Tenn-Fla’ s fraud, the Bankruptcy Court re voked the c onfirmation plan and converted the bankruptc y from a chapte r 11 re organiz ation to a cha pter 7 dissolution. See id. at 973. Tenn- Fla a

ppeale d, and the Bankruptcy Court’s holding was aff irmed by the United States Di stric t Co urt f

or theW e ste rnDi stric t of T e nn e sse e , s e e 22 9 B. R. 7 20 (1 99 9) , a ndby the Six th Circuit Court of Appea ls, see 226 F.3d 746 (2000). 5-5-

On June 25, 2001, a fter T enn-Fla’s a ppeals had been exhauste d, the Bankruptcy Court issued an orde r re leasing all of the funds held in e scrow. Once rele ased, the funds wer e paid to First Union as trustee for the bo ndholders. In D ece mber 2001, Mr. Coleman le arne d that the funds had be en rele ased f rom escr ow. At that time, he made a dema nd t o T en n -F l a for payment of Coleman Manage ment’s re al estate commission on the sale of the Lake side property to United D ominion, but he did not rec eive it. He did not file a claim in the Bankruptcy C o u rt re q u est ing that Coleman Manage ment be paid its commission on the sale.

B. Pr oc e e din gs in the Lowe r Co urt

On Marc h 8, 2002, Coleman Manage ment filed the instant lawsuit aga inst Tenn-Fla and the gener al partners of Tenn-Fla, alleging claims based on brea ch of c ontrac t, brea ch of implied duty of good faith and f

air de aling, q u a n t um me ru it , and unjus t enrichme nt. On April 18, 2002, the de fe nd a nts re mov e d th e c a se to f e de ra l c ou rt , c la imi ng that fe de ra l jurisd ic tio n wa s pr op e r b e c aus e Te nn -F la wa s in ban kr

up tc y. In re sp on se , Cole ma n Man a ge me nt vol un tari ly dis mis se d its c la ims against Tenn- Fla, leaving only the claims against Tenn-Fla’s gener al partners. Af ter that, the f

eder al court c oncluded that it lacke d subject matter jurisdiction and, i n J an u ary 2003, the case was rema nded bac k to the state trial court below.

On Oc tob e r 2 9, 20 03 , th e re main in g def e nd a nts , T e nn -F la ’s ge ne ra l pa rt ne rs , (“D efe ndants”), f

iled a mot ion to dismiss arguing, a mong other things, that Coleman Manage ment’s claims wer e bar

red by the applicable statute of limitations, t he doctrines of re s ju dic ata and collate ral estoppel, and the equitable doc trine of unc lean ha nds. On September 28, 2006, the t rial court hear d
or a l a rg ume nt o n th e mot ionto d ism iss . O n O c tob e r 1 0, 20 06 , it de nie d th e De fe nd a nts ’ m oti on to dismiss and set the matter for trial.

Th e tria l w a s se t f

or Fe br ua ry 19 , 2 00 7. Th a t mo rn ing , b e fo re the tr ia l be ga n, theDe fe nd a nts fi le d a mot ion fo r a dir e c te d ve rd ic t or , inthe a lte rn a tiv e , f or e ntry o f j ud gme nt i n th e ir fa vo r, a ga in raising t he defenses of statute of limitations, re s ju dic ata a nd c oll a te ra l e sto pp e l, andun c le a n h a nd s. The trial c ourt took the motion under adviseme nt and then proc eede d with the testimony.

Mr. Coleman testified at the outset of the trial. The Settlement Statement for the c losing on the Lake side property was dra fted by Mr. Coleman, T enn-Fla’s CFO, Steve Rudolph, and the attorneys f

or Tenn- Fla. They dra fted the Settlement Statement to include a provision stati ng that Coleman Manage ment ’s $142,000 re al estate commission from the sale of the property would be place d into es c r o w a lo n g w ith th e r e main in g f u n d s f r o m th e s a le

. W h il e d r a f ti n g th e s e tt le me nt statement, Mr. Coleman sa id, the attorneys f or Tenn- Fla specifica lly asked him whether he “ha d any probl em ” wi t h putting C oleman Mana gement’s c ommissi on in escrow until a future date. He indicated to them that h e d id not, because he believe d that Coleman Manage ment’s commission would be plac ed in sa feke eping in e scrow. Mr . Coleman said, “As long a s I fe lt like my money was in escrow , I fe lt like it was safe.”

Al tho ug h the Ba nk

ru ptc y Court re le a se d the e sc ro w fu nd s in Ju ne 20 01 , M r. Col e ma n d id not rec eive a

copy of the Bankruptcy Court’s or der until Dec ember 2 0 0 1 , an d said that he ha d no knowledge of

the re lease of the e scrow f unds until he rece ived t he order. Mr. Coleman the n asked-6-

Tenn-Fla’ s attorneys for

Coleman Manage ments’ commission monies that had bee n rele ased f rom escr ow. They r eplied that “[t ]h ey didn’t know wher e [the money] we nt.” A fe w months later, Col e ma n M a na ge me nt f

ile d th is l a ws uit

.
Mr . Co le ma n a dmi tte d th a t, at the tim e the Ba nk ru ptc y Court val ue d the La ke sid e pr op e rty at $9.1 million, he knew that United Dominion and sever al others wer e interested in pur chasing the property for a substantially higher price

. He al s o acknowledged that he had told all prospec tive purchas er s t h at Tenn- Fla could not sell the Lakeside property until t he bankr uptcy plan wa s confirme d. Just after the plan was c onfirmed, Mr. Colema n said, Tenn- Fla’s at t o rn eys and Dr. Meyer “wa nted to sell it right quick and get rid of it.” Soon there afte r, United Dominion and a nother prospec tive purcha ser made official offe rs t o purcha se t he prope rty. Mr. Coleman aske d the forme r CFO of Te nn -F la , St e ve Rud olp h (“ Mr . Rudo lph ” ), wh e the r se lli ng the pr op e rty s o q uic kly wo uld be lega l, questioning whether such a quick sale on the he els of the Bankr uptcy Court’s conf

irmation would be as if T enn-Fla ha d “slap[e d] the judg e or the Court across the f ace with a wet f

ish.” He
sa id M r. Rud olp h a ssu re d h im that it w ou ld b e “ fi ne a ndle ga l.” Th e re fo re , w ith in t wo or thr e e days , Tenn-Fla, through Mr . Coleman, ac cepte d United Dominion’s offe r to purcha se the prope rty.

In Tenn- Fla’s bankruptc y proce edings, Mr. Coleman said, he was never an actua l party and he wa s neve r i n an adversarial position. He asserte d that the Def endants owe d Coleman Manage ment $142,000 in rea l estate c ommissi ons plus inter est from the date of the sale, a s well as attorney’ s fee s under t

h ema n a g e me n t ag r e e me n t. Cole man Mana gement had a dmitted into evidence trial Exhibit 5, which included a c alculation of the prejudgment intere st it claime d wa s due under the contra ct. The D efe ndants expre ssed disagre ement with Exhibit 5, but made no objection to the admission of Exhibit 5 int o evidenc e.
The trial c ourt also h ea rd t estimony from Mr. Rudolph. He ac knowledged that he was involved in the negotiations surrounding the mana gement agre ement signed by the parties. When the document wa s signed, Mr. Rudolph said, he was aw ar e of the c ommissi on provision and contemplated that Colema n Manage ment would rec eive a commission from Tenn-Fla’s sa le of the Lake side property to United Dominion. That concluded t he evide nce; the D efe ndants did not offer any re buttal testimony or any evidenc e contr ary to the c ommissi on calc ulations in Exhibit 5.

On Octobe r 30, 2007, the trial c ourt enter ed an order de nying the Def endant’ s motion for a judgment in their favor and granting a judgment in favor of Coleman Manage ment. The trial court found that, under

the manage ment agre ement, the De fendants, as the gene ral pa rtners of Tenn-Fla, owed Coleman Ma nageme nt its real estate commission for the sale of the Lake side property. It further held that Coleman Mana gemen t ’s cl aims were not barre d by the applica ble statute of limit ations , b e c au s e th e c o mm is s io n w a s p la c e d ine s c r o w , a n d it w a s r e a s o n ab le f

o r Co le man Manage ment to wait to req u est payment until the escr ow funds we re r elea sed. Consequently, the
cause of ac tion accr

ued at the earliest in June 2001, when the funds were release d from esc row, a nd the Ma rc h 8 , 2 00 2 la ws uit , th e re fo re , w a s ti me ly f ile d. Th e tria l c ou rt

rej e c te d th e De fe nd a nts ’ defe nse under

the “unc lean hands” doctrine , finding that it was irre levant to the enf orce ability of the manag em en t agre ement, bec ause any acts of f raud or dece it were made in conne ction with the Bankruptcy Court’s de terminati o n of the va lue of the pr operty, not in the formation of the manage ment agre ement. Accordingly, t he trial court a war ded Coleman Mana gement a c ommissi on-7-

of $142,000, along with $405,030.28 in ac crue d prejudgment intere st, for a total judgment of $547,030.28, plus post-judgment int ere st and costs. The trial c ourt denied Coleman Manageme nt’s
re qu e st f or a tto rn e y’ s f

e e s. Fr om this or de r, theDe fe nd a nts no w a pp e a l.

I S S UE S ON A PP E AL AND S TANDA RD OF R EVIEW On appe al, the De fendants again ar gue that Coleman Manage ment’s claims are negate d by their aff irmative defe nses of statute of limitations and the equitable doctrine of unc lean hands. The De fe nd a nts a lso a sse rt

that th e tr ia l c ou rt

e rr e d inits a wa

rdof pr e jud gme nt i nte re st.

Be c aus e thi s w a s a

be nc h tria l, w e re vie w the tria l c ou rt ’s fi nd ing s o f f a c t d e novo o n the
rec ord, presuming those findings to be cor rec t unless the evidenc e pre ponderates otherwise

. Bogan v. Bogan , 6 0 S. W .3 d 7 21 , 7 27 (T e nn . 2 00 1) ; T e nn . R. App . P. 13 (d ). W e a ff or d g re a t de fe re nc e to the trial court’s assessment of the cre dibilit y o f t he witnesses, and we will not rea ssess fac tual findings based on witness c redibility unless clear and co n vincing evidenc e supports a diff ere nt finding. Humph rey v. David Witherspoon, I nc. , 734 S.W.2d 315, 315-16 (Te nn. 1987). The trial court’s c onclusions of law a re r eviewe d de novo , with no such presumption of cor rec tness. See Sta te
v . L e v a nd o ws ki , 955 S.W .2d 603, 604 (Tenn. 1997)

. W he the r the do c tr ine of “ un c le a n h a nd s” sh ou ld a pp ly i s a n iss ue wi thi n thetria l c ou rt ’s dis c re tio n a ndwi ll n ot b e re ve rs e d a bs e nt an a bu se of that discre tion. See Mark P irtle Chevrole t, Inc. v . Celebration Nissan , Inc. , No. M2002-00554- COA-R3-CV, 2003 WL 21047139, at *4 (Tenn. Ct. App. May 9, 2003). An awa rd of pr ejudg ment interest is also re viewed f or an a buse of discr etion. Myint v Alls tate Ins. C o. , 970 S.W.2d 920, 927 (Tenn. 1998)

.
A N A L Y SIS A. Statute of Li mitations

Th e De fe nd ants fi rs t c ha lle ng e th e tr ia l c ou rt ’s ho ldi ngon

the statut e of

lim itatio ns . It is undisputed that the applicable s tatute of limitations for Coleman Manag ement’s br eac h of contra ct claim is six y ear s. See Tenn. Code Ann. § 28- 3-109(a )(3) . In reje cting the Def endants’ statute of limit ations defe nse, the trial c ourt found that Mr. Coleman a cted r easona bly in waiting until afte r the Bankruptcy Court rele ased the escr owed f unds in June 2001 to file the instant lawsuit for Coleman Manage ment’s commission, because Mr. Coleman had been a dvised by counsel f or Tenn- Fla that his commissi on would be held f or him in escrow :
Whi le Plaintiff may have earned his commission when the sale w as consummated in April of 1994, the Court finds that it is reasona ble that P l ai n t i ff wa ited until the Bankruptcy Court re lease d the esc rowe d funds, on June 25, 2001, to re quest payment and/or file suit for

his commissi on.
Thus , the trial court concluded that the limit ations period on Coleman Mana gement’s c ause of
a c tio n b e ga n to ru n at the e arl ie st in J un e 20 01 , w he n th e e sc ro w f un ds we rere le a se d, or

a t th e la te stW e no t e t hat t hi s i s a l awsui t t o recove r agai nst t he general pa rt ners f o r t he l i ab i l i t y of t he p art ners hi p , T enn6
Fla. P urs uant t o T enness ee C o d e A nno t at ed § 6 1

- 1

- 3 0 6 (a), “ al l pa rt ners are l i ab l e joint l y and s everal l y f o r al l ob l i gat i o ns of t he part ner s hi p unl es s ot her wi s e a gr eed by the c l aim an t o r provi ded b y l aw. ” Se e al s o M i ele v. Zur i ch U

. S. , 98 S .W .3 d 6 7 0 , 6 7 5 (T e n n . C t. A p p . 2 0 0 2 ); Un sec u red C red i t o r’s C o m m . o f S ea so n s P ro

p s. v. M i ll er & M a rt i n (In re S e a so n s P ro

p s.) , 141 B

. R

. 631 , 634 ( B ank r

. E

. D

. T enn

. 199 2). T hu s , t he brea ch of co nt r act cl ai ms a gai ns t t he gen er al p a rtn e rs c o u ld no t ar ise un til a fter the p a rtn e rs h ip ha d b re a c h e d it s o b liga tio n

.

-8- in Dece mber 2001, whe n Mr. Coleman’s dema nd for payment was re fused. The ref ore, the trial court
rea soned, the law suit was timely filed on Marc h 8, 2002

.
A c a us e of a c tio n f or br e a c h o f c on tr a c t a c c ru e s on the date of

the br e a c h o r whe n o ne pa rt y de mon str a te s a cle a

r int e nti on

no t to be bo un d b y

the c on tr a c t. Do nov an v . Na t’ l Commerc eBank 6 Servs., Inc. , No. W2000-03064-COA-R3-CV, 2002 WL1751329, at *3 (Te nn. Ct. App. Mar. 15, 20 02 ); Wil

kin s v. Third Nat ’l

Bank in N as hv ill e , 884 S.W .2d 758, 761-62 (Te nn. Ct. App. 1994). “Thus, the statute of

limit ations beg ins to run when a contra cting party first knows or should know that the contra ct will not be perf ormed.” Wil

kin s , 884 S.W .2d at 762.

In Donovan , cited by

the trial cour

t, in August 1988, the pla int i ff co n s u l t ant and the defe ndant bank e ntere d into a consulting contrac t that expired by its own terms in Dece mber 1988. The c ontrac t provided that the c onsultant w ould r ece ive a salary plus $2,000 commissi on for e ach branc h bank that wa s established in a super m arke t due to the consultant’s e ffor ts. The contra ct
e xpir e d, but th e c on su lta

nt c on tin ue d to wo rk

fo r the ba

nk fo r te n y e ars wi th no wr itt e n a g re e me nt. Duringthat time, the bank never paid the consultant the $2,000-per -store commission. In 1990, the consultant demande d pay ment of the c ommissi on, but the bank ig nore d h i s demand. The bank terminated the consultant in October 1998. Donovan , 2002 WL1751329, at *1-2. In May 1999, the consultant fi l ed s uit ag ainst the bank c laiming, among othe r thing s, that he wa s entitled to the $2,000-per -store bonus. The trial court grante d summary judgme nt in favor of the def endant on the bonus claim, finding that it was barr ed by t h e s i x -y ear statute of limitations. The consultant appea led, and the a

ppellate c ourt aff

irmed. The appellate court found that the consultant’s ca use of action ac crue d n o l at er than 1990, when his de mand for pa y ment of the bonus wa s ignor ed, demonstratingthat the bank did not intend to honor t his provision of the expired contrac t. Id. at *3.

In acc ordanc e with the ana ly sis in Donovan , the pi votal issue in this case is whe n Coleman Mana g e me nt k

ne w, or wh e n s ho uld

it h ave kn ow n, th at Te nn -F la did no t inte nd

to h on or its obligation under the mana g ement agree ment to pay the commissio n fo r t he sale of the L akeside proper ty . The De fenda

nts argue that Coleman Manag ement knew or should ha ve known as ea

rly as Ap ri l 14 , 1 99 4, the date of the sa le , that Te nn -F la wo uld no t fu lf ill its ob lig a tio ns un de r the c on tr a c t. They point out that the Bankr

upt cy C o u rt ’s April 1, 1994 orde r provided that “all normal c losing expenses” must be paid immediately from the sa le proc eeds. Rea l estate c o m m i ssions would be
c on sid e re d p art

of the “ no rm a l clo sin g e xpe ns e s, ” a s evi de nc e d by the fa c t th a t th e buy e r’ s r e a l e state
a g e nt, Mr . Sm ith , w a s p a id a t th e c los ingfr om t

he pr oc e e ds of

the sa le . T he re fo re , th e De fe nd ants conte n d , r e g ar d le s s o f

an y un d e r s ta n d in g amo n g th e p arti e s o r an y la n g u a g e in

th e Se ller’s Settlement Statement, Coleman Manag ement bec ame e ntitled to it s commission on t he date of theT h e D e fe n d a n ts a ttem p t t o d isc o u n t t h e s ig n ific a n c e o f th e S e ller ’s S e ttl e m e n t S ta te m e n t b y a sse rtin g th a t i t 7

w as pre pare d by M r

. Co l em an. T he proof a t t r i al , how ever , s ho w s t hat t he do cum ent w as pre pare d by t h e at t or n ey s f or T enn
- Fl a, H ank Shel t on an d B r ad Fost er , an d by t he C FO of T enn
- Fl a, St eve Rudo l ph, wi t h M r

. Co l eman’ s as s i s t anc e.
-9- c los ing , Apr il 1 4, 19 94

. Whe n Col e man Ma na g e me nt did no t re c e ive its c omm iss ion on that date at the closing , its cause of

action beg an to ac crue . The De fenda nts further a

rgue that Mr. Coleman’ s own testimony

showed that he knew that Coleman Ma nag ement had a

claim for r elief a g ainst TennFl a as ea rly as April 1994. Mr. Coleman te stified that, when the sa le took place , he “f igur ed he
wo u l d h ave to go to cour t for [the commission] .” Thus, Mr. Coleman ha d actua l knowledg e that Coleman Manag ement wa s entitled to its commi ssion at the closing , and thus there was no ba sis for
wa iti nge ig ht ye ars to f

ile a laws uit a g a ins t T e nn -F la ’s pa

rt ne rs to c oll e c t it

.
In response , Coleman Manag ement asse rts that, reg ardle ss of any languag e in the B a

nkruptcy Court’s Ap ri l 1994 order, the parties to the mana g ement contr act – Te nn-F la and Coleman Manag ement – agr eed that Coleman Manag ement’s r eal e state commission was owed at the closing in A pril 1994, but that the pay ment of it would be delayed until the escr ow monies wer e re lease d. This understanding , they

claim, is evidenc ed in the Seller’ s Settlement St atement, which provide s sp e c if ic a lly that Co le man M ana g e me nt’ s $ 14 2, 00 0 c omm iss ion wo uld be put in e sc ro w a lon g wi th the re maining f

unds from the sale

. T h er ef ore, r eg ardle ss of whethe r this understandingwas rec og nized by

the B ankruptc y C o u rt , Tenn-F la did not express its i ntent to refuse to pay the
c omm iss ion

un til a ft e r t

he e sc ro w f

un ds we re re le a se d an d it de nie d Co le man M ana g e me nt’ s r e qu e st to be paid out of the escr owed funds. In addition, Colema n Manag ement ar g ues that Mr. Coleman’ s testimony , when r ead in c ontext , actua lly supports a findingthat he reas o n ab ly believed that Coleman Manag ement’s rea l e state commission wa s in “ safe keeping ” in e scrow, and t h at i t was re a so na ble fo r h im t o wa it unt il the e sc ro we d fun ds we re re le a se d b e fo re de mand ingpa y me nt o f h is commission.

Th e tim e at w hic h Co le man Mana g e me nt kn e w or sh ou ld have kn ow n that T e nn -F la wo uld
no t p ay th e c o mm is s io n un d e r th e c o n tr a c t is a qu e s ti o n o f f a c t, w h ic h w e r e v ie w under a “pre pondera

nce of the evidenc e” sta

ndard. See Te nn . R. App . P. 13 (d ). Th e tr ia l c ourt in t his c a se made a fac tual finding that Coleman Manag ement wa s rea sonable in its belief that Tenn-F la did not brea ch its ag ree ment to pay the commission by

not paying it on the date of the sa le. Rather, it found that Mr

. Col e man w a s advised by counsel for Tenn-Fla that Col eman Ma nageme nt’s commission
wo uldbe he ld i n escr ow, a ndthat it wa s r e a so na

ble un de r the c ir c ums ta nc e s f or him to w a it t o reque st payment of the commission until the Bankruptcy Court relea sed the e scrowe d funds in June 2001. The evidenc e submitt ed at trial clea rly supported the trial court’s findings. Undi sputed
e vid e nc e sh ow e d th a t th e pa rt ie s a gr e e d th a t Co lem an Manag e me nt’ s c omm iss ionwo uldbe pa id from the e scrowe d funds as set f orth in the Seller’s Settlement S tatement. This arr angeme nt was 7 prompted by the c hanged c ircumstance s. At the time that the parties exec uted the mana gement
a gr e e me nt, the c on te mpl a te d s a le of the La ke sid e pr op e rty h a d n ot y e t be c ome c on tr ov e rs ia l. There afte r, of c ourse, the tr ustee for the bondholders, Fi rst Union, sought to undo the Bankruptcy Court’s confirmation order, a sserting that Tenn-Fla obtained it by fraud. Mr. Coleman and Coleman Manage ment bore some r esponsibility i n this for failing to disclose to t h e B an k rupt cy Court the-10-

ne go tiatio ns fo r the sa le of the La ke sid e pr op e rty. Th e Bank rup tcy Cou rt pe rm itt e d th e sa le to United Dominion to go through only upon the p ro v i s o t h at t he proc eeds, le ss “normal c losing expense s,” would be put in esc row. No objection wa s made in the Bankruptcy Court to the provision in the Settlement Statement indicating that Coleman Manage ment’s re al estate commission would be paid at a later date f rom the esc rowe d funds. The Bankr uptcy Court never ad d re s s ed whether Coleman Manage ment was entitled t o a co m m i ssion. Even though the Bankruptcy Court’s or der state d that “norma l closing expense s” would be paid at the time of the closing, the evide nce supports the trial court’s f inding that the part i es u nderstood that Coleman Mana gement’s c ommissi on would be plac ed in esc row, de la yin g p a yme nt o f the c omm iss ionun til thee sc ro w f un ds we rere le a se d. Un de r the se circ umstances, Coleman Manageme nt’s claim for the commi ssion would not acc rue at the time the sale of the property closed. Onc e the e scrow f unds were rele ased , h o we v er , and Coleman Ma na ge me nt’ s d e ma ndfo r p a yme nt o f the c omm iss ionwa s r e fu se d, it b e c a me c le ar that T e nn -F la and its partner s did not int end to fu l fi ll the obligation to pay the commission as set forth in the
ma na ge me nt a gr e e me nt andtheSe ttl e me nt S ta te me nt. At that po int , Col e ma n Ma na ge me nt’ s c la im for br eac h of contra ct ac crue d. Under these c ircumstance s, we ca n not conclude that the evidenc e preponde rate s against the trial c ourt’s finding in this regar d.

The De fenda

nts argue that the statute of l i m i tations was not tolled by putting Coleman Mana g e me nt’ s c omm iss ion in e sc row because , b y

a g re e ingto h ave the c omm iss ion pla c e d in
escr ow, Mr. Coleman was simply avoidinghavingthe B ankruptc y Court adjudicate whether C o l e m anM an a g e m e n ts h o u l d b e p e r m i t t e d t o r e c e i v e th e c o m m i s s i o n

. T h e D e f e n d an t s a s s e rt , “ In light o f M r. Col e man’ s a c tio ns duri ngthe ba nkrup tc y , h e kn e w t

hat th e B ank

ru ptc y Court wo uld
never allow him a fe e. He waited until the funds in e scrow wer e disbursed to avoid entry of an or der
c le arl y de c lari ng that he wo uld no t be al low e d a ny fe e in t he matte r. ” We m

us t ob se rv e tha

t no pa rt y

– not F irst Union, not Tenn-F la, not T enn-F la’s partne rs, not Colema n Manag ement – ever asked the B ank ru ptc y Court to a dju dic ate wh e the r C ole man M ana g e me nt w a s e nti tle d to its re a l e state commission under the mana g ement agree ment. We decline to spec ulate on what the Ba nkruptcy Court’s response to such a request would have been. We ne ed only deter mine the issue pre sented to us on appea l, namely , whether Coleman Manag ement’s c laim for bre ach of the agree ment to pay its rea l estate commissi on acc rued more t han si x y ear s prior to the fil ing of its lawsuit. The e vidence does not preponde rate ag ainst the trial court’s finding that Coleman Manag ement’s c laim acc rued whe n i t s d emand f

or the c ommissi on was not satisfied a fter the escr ow funds we re r elea sed. There fore , the lawsuit was timely filed in Marc h 2002.
B. Doctrine of Unc lean Hands

The De fendants next argue that the trial court erre d i n failing to dismis s Coleman Manage ment’s claim base d on the equitable doc trine of unclea n hands. The doc trine is derive d from the equitable ma xim, “He who c omes into equity must co m e wi t h clean hands.” Segal v. United Am. Bank , No

. W2 0 0 4 -02347-COA- R3-CV, 2005 WL 3543332, at *4 ( Tenn. Ct. App. Dec . 28, 2005) (c iting Thomas v. Hedges, 183 S.W.2d 14, 16 (Tenn. Ct. App. 1944) (c iting Gi bs on ’s Su its in C ha nc e ry , 4 2 a nd51 )) . T he do c tr ine of un c le a n h a nd s h a s b e e n d e sc ri be d a s f oll ow s:-11-

The princ iple is genera l, and is one of the ma xims of the Court, that hewho comes into a Court of Equity asking its int erposition in his behalf, must come with cle an ha nd s; andif

it a pp e a r f ro m th e c a se ma de by him

. . . th a t he ha s h ims e lf

be e n g uil ty of unconsc ientious, inequitable, or immoral conduct, in and a bout the same matter s wher eof he complains of his ad v er s ar y , o r i f his claim to relief grows out of, or depends upon, or

is insepara

bly connec ted with his own prior fr aud, he w ill be
re pe lle d at th e thre sh oldof thec ou rt

. Cont ine nta l Banke rs Lif

e Ins . Co. of

the Sout h, I nc . v . Si mmo ns , 56 1 S. W .2 d 4 60 , 4 65 (T e nn . Ct

. App. 1977) (c iting C.F. Simmon s Medicine Co. v. Mansfield Drug Co. , 23 S.W. 165, 168 (Tenn. 18 93 )) ; se e als o H EN R Y R. G I B S ON , G I B S ON ’ S S UI TS I N C H A N CERY , § 2.09 (William H. Inman e d. 8th ed. Matthew Bende r & Co. 2004)

.
Th e trial cou rt foun d th a t th e un c le a n h a nd s d oc tr ine wa s ir re le va nt t o th e De fe nd a nts ’ lia bil ity un de r the ma na ge me nt a gr e e me nt: This Court also finds any claim of “ unclea n hands” to be irrelevant in rega rd t o the validity or enfor cea

bility of the Manageme nt Agree ment. Any alleged acts of f raud or deceit wer e in connec tion to the B ankruptc y Court’s determination of t he value of the Property involved a nd not in the formation of the a gree ment.

Th us , th e tr ia l c ou rt

de nie d th e De fe nd a nts ’ m oti on to d ism iss on thi s b a sis

. On appe al, the Defendants again conte nd that Mr. Coleman’s fr audulent conduc t, as detailed by the Bankruptcy Court , s h o u ld p r e vent Coleman Mana gement fr om rec overing in this lawsuit. The Bankruptcy Court spe cifica lly f ound that Mr. Coleman made misrepr esentations to t he Bankruptc y Court rega

rding the value of t he Lakeside property “for hi s own benefit,” and that Mr. Coleman was mot ivate d b y the mis c on c e pti on that Co le ma n M a na ge me nt w ou ld n ot b e pa id a re a l e state commission if the property we re sold while Te nn-Fla was in bankr uptcy: Mr . Cole ma n’ s agr e e me nt with the de bto r pr ov ide d for a re a l e state c omm iss ionto Mr. Coleman in the eve nt of a sale of the prope rty. T ri al ex h ibit 29. In the Se pte mbe r 1 4, 19 92 c on ve rs a tio n with Mr . Smith , Mr. Col e ma n als o told Mr . Sm ith that n e ith e r

o f th e m c o u ldr e a li z e a

r e a l e s tate c o mm is s io n o u t o f a s a le during ba nk ru ptc y, a s th e ba nk

ru ptc y c ou rt

wo uldno t “ pay” a

c omm iss io n. Smith deposition, p. 46. This was obviously an incorre ct con cl u s i on of statement, a s bankruptc y courts fr equently appr ove commissions for prof essionals who have been employed prope rly and who benef it the bankruptc y estate by production of sales. See 11 U.S.C. § 330. Ne v e rth e le ss, Mr

. Col e ma n’ s st

ate me nt i nd ic ate s a hig he r c on c e rn for his ow n benefit than for the benefit of creditors or of the bankruptcy e state.

In r e Te nn- Fla Pa rtne rs , 170 B.R. at 952 (e mphasis added) . The Bankr uptcy Court found that Mr. Coleman discoura ged prospe ctive buyer s from making formal o f f e r s o nth eL a

k e s id ep r o perty during the bankr uptcy proc eedings, a sking them to defe r any offe rs until afte r the re organiz ation plan was confirme d. The De fendants argue that Mr. Coleman’s fr audulent, self-serving conduct related t o the-12-

sale of the Lake side property, and ther efor e that Coleman Mana gement should be “ repe lled from the threshold of the c ourt.” G I B S ON , su pr a , at § 2.09.

In re sponse, Coleman Mana gement ar gues that t he trial c ourt soundly exer cised its discretion in rejec ting the Defe ndants’ “unc lean hands” def ense, be cause any allege d fraud by Mr. Coleman didno t in vo lvethe fo rm a tio n o f the ma na ge ment agre ement , w hic h is the su bje c t of thi s la ws uit

. This is a legal and not a n equit ab l e cl aim , Coleman Manage ment argue s, and so the doctrine of “uncle an hands” applies onl y if the unconsc ionable conduc t arises out of the “ particula r transa ction which is the subject of the litigation.” Me tric Pa rtne rs G ro wth Sui

te Inv e sto rs, L. P. v . N

as hv ill e L o d ging Co. , 9 8 9 S.W.2d 700, 703 (Tenn. Ct. App. 1998). H ere , in the absenc e of any proof of frau d wi th res pe c t to thema na ge me nt a gr e e me nt, thedo c tr ine of “ un c le a n h a nd s” is n ot a va lid defe nse. Furthermore , Coleman Manage ment claims that the De fendants misconstrue the ef fec t of the Bankruptcy Court’ s order s, asserting that the Bankruptcy Court did not and could not have f ound Mr. Coleman guilty of fraud beca use, if nothing else, Mr. Coleman w as not a pa rty to the bankruptc y a ndwa s n ot w ith in the jurisd ic tio n of the Ba nk ru ptc y Cou rt

. In fa c t, Mr . Co le ma n w a s a c tin g a s a repr esentative o f T en n -F l a and wa s working to maximize the inter est of the De fendants. Any misconduct on the part of Mr. Coleman wa s committed against t hird parties, such as First Union, the bo nd ho lde rs , a nd oth e r c re dit or s, no t a ga ins t T e nn -F la or theDe fe nd a nts , a ndthu s w ou ld n ot n e gate the De fe nd a nts ’ o bli gatio ns to C ole ma n M a na ge me nt u nd e r the ma na ge me nt a gr e e me nt. Coleman Manage ment rightl y n o t es that, for the unclean hands doctrine to apply, the inequitable or imm oral conduct “must relate to the particular transaction which is the subjec t of the litigation.” Chappell v. Dawson , 308 S.W.2d 4 2 0 , 421 (Tenn. 1957) . The Supreme Court has stated:

The c ontrolling principle is thus st ated in Gibson’s Suits in C hance ry [c itation omi tte d] : “ But

the op e ratio n of the ma xim is c on fi ne d to mis c on du c t c on ne c te d w ith the particular matter

in liti gation; and does not extend to any misconduct, howeve r gross , wh i ch is unconnec ted there with, and with which the de fendant is not
conce rned.”

Id. Furthe rm or e , th e app lic a tio n o f the do c tr ine is c le arl y w ith in the dis c re tio n o f the tr ia l c ou rt :

Dec isions regarding the pr oper a p plication of the doc trine of unc lean ha nds are heavily fa ct-de pendent and are addre ssed to t h e consi dera ble discre tion of the trial
c ou rt . A c c or din gly , cr e dib ili ty d e te rm inatio ns c a n b e piv ota l, andthe tria l c ou rt is i n the best position to make these determinations be cause it ha s the opportunity to view the witnesses a s they aretestifying.

In r e Est ate of Boo te , 265 S.W.3d 402, 418 (Tenn. Ct. App. 2007).

Fr om a caref

ul re vie w o f the re c or d, we c on c lud e that th e tria l c ou rt didno t a

bu se its discretion in dec lining to apply the unc lean hands doctrine to “ repe l[] [Coleman Manageme nt] at the threshold of the c ourt.” Gibson’s at 42, 51. The Bankruptc y Court indeed found that Mr. Coleman misrepre sented the value of the Lake side property to the Bankruptcy Court, in part to further his ownThe Bankr upt cy Cour t ’ s fi n d i n g s ar e uncl ea r on t he ext ent t o w hi ch r epr es ent at i ves of Tenn- Fl a and t he 8
i nd i vi du al par t ners w er e i nv ol ved i n t he f r aud c om m i t t ed on t he B ankrupt cy C ou r t

. Th e Bank r up t cy C ou r t opi ned t hat i t w as “per s uaded t hat D r

. M eyer w as kept s om ew hat i n t he dark of al l of t he act i on s and t he i m pl i cat i on s t here of t aken by M r

. Co l em an i n re gard t o i nt er es t ed pu r chas er s

. ” In re T en n -F la P a rt n ers , 170 B. R. a t 95 2

. It f ur t her not ed, how eve r , t hat i t w as “ not ne ce s s ar y t hat D r. M ey er o r t h e p ar t ner s e xpr es s ed a s pec i fi c i nt ent t o de f r aud.

. . . [ T]he

ac t i ons of t he par t ner s hi p m ay pr ovi de a bas i s upon w hi ch f r audul ent i nt ent m ay be i nf er r ed. A nd, D r

. M eye r a nd t he ot her part ners had aut ho r i zed M r

. Co l em an t o act on b ehal f of t he part ners hi p. ” I

d.
-13- interests. Howe ver, the trial court c orre ctly found that Mr. Coleman’ s actions di d not relate to the formation of the manage ment agre ement betwee n Coleman Manage ment and Tenn-Fla, and that the manage ment agre ement is the sourc e of t h eD e f e n d an ts’ obligation to pay the rea l estate c ommissi on. Furthermore , it is notinappropriate to consider the fac t that the victims of any misconduct by Mr. Coleman wer e Te nn-Fla’s cr editors, not the De fe ndants. As the Bankruptc y Court found, the Def endants’ inter ests wer e aligned w ith Mr. Coleman’s. The De fendant s , ev en more than Mr

. Coleman, s t o o d t o b en efit fr om the sale outside of bankruptcy: “Te nn-Fla deliberately stalled pu rc ha se rs , c on c e a le d th a t in fo rm a tio n, a ndre pu rc ha se d th e partn ers ’ e qu ity a t a sh arp dis c ou nt, kn ow ing that it

wo uldbe ableto i mme diate ly r e se ll the pr op e rty w ithenough rec overyto satisf y the partners’ personal ex

posure to First Tennessee Bank.” In r e Te nn- Fla Pa rtne rs , 170 B.R. at 968 (empha sis added)

. Under all of t hese circumstanc es, we find no abuse of the trial court’s discretion in declining to apply the unclean hands doctrine to r ejec t Colema n Manage ment’s claim for the rea l estate c ommissi on. 8

C. P re jud gm e nt I nte re st

The De fendants argue that the trial court erre d in awar ding Coleman Manage ment prejudgmen t i n tere st of “$405,030.28, as pr oven at tria l . . . .” They c laim that Coleman Manage ment was not entitled to any prejudgment intere st based on the e quities of the ca se, noting that Mr. Coleman committed fraud befor e the Bankr uptcy Court, did not request his commission from the Bankr

uptcy Court at the closing on the sale of the property, and voluntarily agre ed to delay payment of the commission. The Def endants also point out that they did not have use of the monies wh ile the y w e re in e sc ro w. Mo re ov e r, arg uing th at Cole ma n M a na ge me nt “ c a nn ot h a ve it b oth ways,” the Def

endants assert t hat either Coleman Manage ment became entitled to its commiss ion in April 1994, in w hich case the claim is untimely, or it bec ame e ntitled to the commissi on when the
escr owed funds wer e release d in June 2001, and prejudgment interest should run fr om that date. The Def endants also contend that, even if prejudgment intere st were war rante d, the amount should have been c alculate d acc ording to the 10% per year simple interest authorize d by Tenn es s ee Code An n o tate d § 4 7

- 1 4

- 1 2 3

. U n d e r th is c a lc u lati o n , th e D e f e n d a n ts ar g u e , th e a mount of the prejudgment intere st would be $192,339, rathe r than the $405,030 a war ded by the tria l court.

The Te nnessee Supreme Court has outlined the standard for determining whether an aw ard of pr e jud gme nt i nte re st i s a

pp ro pria te in a

giv e n c a se :
Severa l principles g u i d e trial c ourts in exer cising their discre tion to award or deny prejudgment intere st. Fore most a re the principles of equity. Simpl y stated, the c ourt must decide whe ther the a war d of pre -judgment interest is fa ir, given the pa rticular-14-

c ir c ums ta nc e s o f the c a se . I n r e a c hing a n e qu ita ble de c isi on , a

c ou rt mus t ke e p in mind that the pur

pose of a war ding the interest is to fully compensate a plaintiff f or the loss of the use of funds to w hich he or she was lega lly entitled, not to penalize the defe ndant for w rongdoing.
My int , 970 S.W.2d at 927 (c itation omit ted); see also Scholz v. S. B. In t’l, Inc. , 40 S.W.3d 78, 82- 83 (Tenn. C t

. Ap p

. 2000) (discussing the impac t of My int ). Ge nera lly, an awa rd of pr ejudgment interest is permitted if two c riteria a re met: (1) the amount is certain or ea sily ascertainable and (2) the obligation is not di spute d o n re as o nable gr ounds. Fra nkl in Ca pit al A sso c s. , L.P

. v . Al mos t Famil y, Inc. , 1 94 S.W .3 d 3 92 , 4 05 -0 6 ( Te nn . Ct. A pp . 2 00 5) . “ An a wa rdof pr e jud gme nt i nte re st is w ith in the so un d d isc re tio n o f the tr ia l cou rt a nd the de c isi on wi ll not be dis tur be d b y a n a

pp e llate court unless the rec ord reveals a manifest and palpable a buse of discr etion.” My int , 970 S.W.2d at 9 2 7 ; s ee a lso Spencer v. A-1 Crane Serv., Inc. , 8 80 S.W .2 d 9 38 , 9 44 (T e nn . 1 99 4) ; Otis v. Cambridge Mu t. Fire In s. Co. , 850 S.W.2d 439, 446 (Tenn. 1992)

. Coleman Manage ment’s ca lculation of pre judgment interest, containe d in Exhibit 5, was admitted into eviden ce during Mr. Coleman’s testimony. The De fendants did not subm it any
c ou nte rv a ili ng e v i d e n c er e g a r din g p re jud gme nt i nte re st, didno t c ha lle ng e the c a lc ulatio ns in E xh ibi t 5, and did not object to the admis sion of Exhibi t 5 into evidenc e. The following colloquy took pl ace : [Counsel for Plaintiff]: I m ove that these calculations t o Mr. Coleman on intere st be
a dmi tte d a s th e ne xt d oc ume nt. THE COURT: Any objec tion?
[Counsel for D efe ndants]: We have no obje ction as to what they state

.
TH E CO UR T: I a dmi t – I a c kn ow le dg e yo u’ reno t a gr e e ing to the m. [Counsel for Plaintiff]: Your Honor, if we could have Exhibit handed back to the witness.
Thus, the most that can be said is that the Def endants did not agre e to Exhibit 5. No other objec tion
wa s ma de to the pr e

jud gme nt i nte re st r e qu e ste d b y Co le ma n M a na ge me nt.

The De fendants raised intere sting arguments on appe al re garding the a war d of pre judgment interest, particularly the a rgument t hat prejudgment interest mus t be calculated a ccor ding to T.C.A. § 47-14-123 r ather

than by some other methodology. Unfortunately, none of these argume nts were
raise d to thetr ia l cou rt . In g e ne ra l, i ssu e s n ot r a ise d to the tria l c ou rt c a nn ot b e raise d f

or the fi rs t time on appea l. In re Senti nel Trust Co. , 20 6 S.W .3 d 50 1, 52 8 ( Te nn . Ct . A pp . 2 00 5) . A pp are ntl y re c og niz ing thi s p ro ble m, the De fe nd a nts a sse rt that th e iss ue s o f p re jud gme nt i nte re st a

repr op e rl y befor e this Court because its argume nt “is based upon e rror s of law by the T rial Court,” whic h areT h e D efe n d an t s also a rg u e th at C o l em an M an ag em en t i s n o t en t i t l ed t o an aw ard o f p reju d g m en t i n t ere st 9
becaus e i t i s ent i t l ed t o no com m i s s i on at al l b as ed on t he s t at ut e o f l i m i t at i on s

. In l i gh t of ou r r es ol ut i on of t he ot her i s s ues i n t hi s a ppea l , t hi s a r gum ent i s r ej ec t ed.
-15- revie wed de novo on the re cord. (E m p h as i s i n original). Howe ver, the principle that issues not 9

raise d to thetr ia l c ou rt

c a nn ot b e raise d f

or the fi rs t tim e on app e a l is no t lim ite d to qu e sti on s of fa c t. See, e.g., id. (involving interpre tation of a statute) ; see also Carr v. McMillan , No. M2007-0085- COA-R3-CV, 2008 WL 2078058, at *4 (Tenn. Ct. App. May 14, 2008) (involving the constitutionalit y of a statute)

. Moreove r, the a war d of pre judgment interest is a discre tionary matter based on the equities of the pa rticular c ase. Where the t rial court’s decision i s a discre tionary one, “[i]t is impossible to determine that the Tri al C o u rt abused its discre tion when it never had the opportunity to exerc ise that discre tion in the fi rs t p l ac e. ” Lo ng v . P anne ll , No. E2002-01792-COA- R3-CV, 2003 WL 21276540, at *9 (Tenn. Ct. App. May 30, 2003). I n Lo ng , we e xplained that, if a matter never become s an is sue i n the t rial court, opposing counsel does not ha ve a n o pp ortun ity to make a c ou nte rv a ili ng arg ume nt, a nd the tr ia l cou rt is de nie d th e op po rtun ity to exer cise its discretion based on full consideration of t he competing arguments. Ther efor e, whe n the trial court is not asked to decide an issue at trial, “ther e could be no a buse of discr etion by the Trial Court as to this issue.” I d. (c iting Hobbs v. Hobbs , 987 S.W.2d 844, 847 (Tenn. Ct. App. 1998)). He re, the Def

endants pre sented to the trial court ne ither ar guments nor evidenc e re garding pr e jud gme nt i nte re st. Un de r the se c ir c ums tan c e s, we c a nn ot f indthat th e tria l c ou rt

abu se d it s dis c re tio n ina wa

rd ing pr e jud gme nt i nte re st i n a

ma nn e r c on sis te nt w iththe pr oo f p re se nte d at tria l.
D. BankruptcyCourt’s Conf irmation Order

As a fina l matter, the De fendants argue that Coleman Manage ment is n o t entitled to a commission for the sale of the Lake side property be cause the manage ment agre ement providing for th e commission was voided by the orde r of the Ba nkruptcy Court ente red on January 21, 1994, confirming Te nn-Fla’s re organiz ation plan. That order provided that “all exe cutory c ontrac ts and
un e xp ir e d le a se s o f the De bto r s ha ll b e re je c te d a s o f th e Effe cti ve Date

. . . . ” Th is a rg ume nt i s wi tho ut m e ri t f

or se ve ra l r e a so ns . Fi rs t, the Ba nk ru ptc y Court ord e r on wh ic h the De fe nd a nts re ly pr ov ided s pec if

ic a lly that Co le ma n M a na ge me nt w a s to “ re c e ive the sa me c omp e ns a tio n th a t it
curr ently rec eives unde r its manageme nt a gree ment with Debtor.” Thus, the orde r pre serve s TennFla’s o b l igation to pay a re al estate commission under the mana gement agr eeme nt with Col eman Manage ment. In addition, the co n fi rm ation plan appr oved in the Janua ry 1994 orde r wa s later revoke d when the Ba nkruptcy Court permitted the sale of the Lakeside property to United Dominion to go forwa

rd. More over, none of the Bankr uptcy Court’s orde rs spec ifically addre ss whether Coleman Manage ment wa s en t i t led to a commission under the ma nageme nt agre ement. The De fe nd a nts c ite no la w t o s up po rt the ir a sse rt ion that Col e ma n Ma na ge me nt’ s so le re me dy wa s to seek r ecour se fr om the Bankruptcy Court. Theref ore, we reject the De fendants’ argume nt that the Bankruptcy Court’s Ja nuary 21, 1994 or der strips Coleman Mana gement of its right to rec eive the
rea l estate c ommissi on on the sale of the Lake side property.

C ONCL US I ON-16-

Th e de c isi on of

the tr ial cou rt

is a ff ir me d. Cos ts o n a

pp e a l areto b e ta xe d to Ap pe lla nts David Meye r, James W. Rayner, Richard D. Baker, Rose McKee , NCF Associates, and their surety, for whic h exec ution may issue, if nece ssary.

___________________________________ HOLLY M. K IRBY, JUDGE