# FILED

July 22, 1998 Cecil W. Crowson Appellate Cou rt Clerk JAMES E. McGAUGH, JR., ) ) Plaintiff/Counter- ) Appeal No. Defendant/Appellee, ) 01-A-01-9706-CH-00256 ) v. ) ) Davidson Chancery CHARLE S F. an d JOY CE L. ) No. 96-625-I GALBREATH, ) ) Defendants/Counter and ) Cross-Plaintiffs/A

ppellants, )

) v. ) ) THOMAS LAWL

ESS and FIRST ) AMERICAN NATIONAL BANK, ) ) Cross-Defendan

ts/Appellees. )

COURT OF APPEALS OF TENNESSEE

APPEAL FROM THE CHANCERY COURT FOR DAVIDSON COUNTY

AT NASHVILLE, TENNESSEE

THE HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR

THOMAS E. STEWART Stewart & Black 333 Gallatin Road, S outh Madison, Tennessee 37115 ATTORNEY FOR APPEL LEE JAMES E. McGA

UGH, JR.
ERIC V. HEL

MERS 721 First American Center Nashville, Tennessee 37237 ATTORNEY FOR APPELLEE FIRST AMERI CAN NATIONAL BANK
THOMAS W. LAWL

ESS, Pro Se Lawless & Associates 315 Deaderick Street Nashville, Tennessee 37238

CHARLES GALBREATH 211 Union Street, Suite 901 Nashville, Tennessee 37201 ATTORNEY FOR APPELLANTS CHARLES and JOYCE GAL BREATH

AFFIRMED WALTER W. BUSSART,

SPECIAL JUDGE-2- 

## OPINION

This suit involves the trans fer of a piece of real e state located in Madison, Tennes see on w hich is situat ed a commerc ial dou ghnut bakery. The title of the Property is vested in Defend

ant Charles Galbr

eath and was con

veyed to M

r. Galbreath by deed from DH Restaurants, Inc. Mr. Galbreath l eased the property to Diversified Hospi

tality Group ( " Diversified"), and shortly thereafter, Diversified subleased the proper ty to Shipley

Do-Nuts of

which Plaintiff James McGaugh is the princi pal owner.

Before cont inuing to the substantive issues of this appeal, we consider appellant's Rule 14 motion to c onsider post-judgm

ent facts. Afte

r due consideration of the appellant's m

oti on, the court finds that t he fac ts do not co me within the purview o

f the rule. The m

otion is therefore de

nied.

On November 1,

1995, Mr. McGau

gh entered into a

contract to purchas

e real estate, leasehol

d improveme

nts a nd equipment ("the Property") f

rom Defendant

for the sum of $1 80 ,00 0 with closing set for January 1, 1996. Defendant

was to f urnish the Property "by

a good and valid warr

anty deed" secured by a title insurance policy. On December 15, 1995, Plaintiff received his pr imary financing comm

itment to financ

e the property f

rom First Am

eric a n National Bank

("the Bank") so as t

o place him

in a position to be rea

dy, willing and able to close for ca

sh on thescheduled closing date pursuant to the c

ontract. The Bank's comm

itment to lend was subject to the Ba nk receiving a firs

t lien on the Property and a deed of tr ust.

The problems in this case first arose when Thomas Lawless, the Bank's attorn ey, notified the Bank and Mr. McGaugh o

f the existence of possible defects in the title. The fi

rst defect involved t

he original lessee (

and sub- lessor) , Diversified,who was in Chapter 7 bankruptcy proceedings in Connecticut. Mr. Lawless opined that because Diversified's le

ase contained an opti

on to purchase the Proper ty at t

he end of the lease f

or $250,000, this lea

se, along with the option, was now the property of the bankruptcy estate. The second defect was due to a vendor's lien against the property which would either have to be released-3-

f or the amo unt n ecess ary to p ay it of f or wo uld h ave to be ded ucted from th e $180,000 sale price. When Defendant Mr. Galbreath ref used to take the necessary steps to clear the two d efects in the title, Mr. McGaugh sued for specificperformance and damages as a result of contract breach. Mr. Galbreath counter-sued for breach of contract and filed

a cross action against the B ank and it s attorney Mr.Lawless for negl igently misr

epresenting that the

title wa s defective when it

was not.

Initia lly, the trial court refused Mr. Galbreath's demand for a j ury trial and granted the Bank's and Mr. Lawless's motions for summary judgment. The order of dismissal also directed Mr. Galbreath to pay sanctions for violati

ons of Rule 11 as well as attorne

y's fees total

ing $7,950. Subsequen

t ly, the cou

rt granted summary judgment to Pla

intiff Mr. McGa

ugh. Mr. Galbre

ath gave his notice of appeal, and a stay of execution was granted. After the stay was granted, Counterdef endant Mr. Lawless had $2,500 seized by garnishment from Joy ce Galbreath's bank account with the Ba

nk. The trial j udge, on motion to dissol ve the garnishment,

held that Joyce G

albreath had not appealed and was not a party to the stay of execution bond. H e therefore decl

ined to order that Joyce Galbreath's money be released. I. Appeal of Joy ce Galbreath As a prel iminary m atter, we must determine whether or not Joyce Galbreath is properly bef

ore this court on appe

al. On October 28, 1996, the Chancery Court entered a fi nal order dis missing t

he Bank and Mr. Lawless as counter-defendant

s. In that order, the court

found that Mr. Lawless had carried the burden of proof that M r. Galbreath ha

d violated Rule 11. T

he cou rt then reinstated the sanction

previously awarded against Charles and Joyce Galbreath of $2,500 to deter wrongful conduct and the frivolous filing and continued prosecution

of this case against Mr. Lawl ess and the Bank. Finally, the court

n oted that the award of sanctions against Cha rles and Joyce G

albreath wou

l d become a final order as this issue affects no other controversy in the case.

On November 13,

1996, Mr. Galbre

ath filed a Notice

of Appea l which made reference to the

Rule 11 sanctions. Joyc

e Galbreath's na

me was not on

this notice nor

did she file a separate notice. On November 18, 1996, Mr. Ga

lbreath-4-

filed an Amended N

otice of Appeal w

hich addressed issues

in v olving Mr. Lawless's a d vice to his cli ents re gardin g the cl oud on the tit le of th e Prope rty. Again, Joyce Galbre

ath was not designate

d as an appellant in the

am ended notice. The first

time that Joyce Galbreath's name appear ed on a notice of appeal

was on the notice filed February 18, 1997. Here, both Char les Galb reath and Joyce L. Galbreath

noticed their appea

l "from the adv

erse judgments of the trial court."

"Thepurpose of the notice of appeal is sim

ply to declare in a formal way

an intention to ap p eal." Tenn. R. App. P. 3 advisor y commission cmt., subdivision

(f). Tennesse

e Rule of Appellat

e Procedure 3(f)

states in pertinent partthat"[the notice of appe al shall specify

the party or parties taking the

appeal.

. . " Besid es requiring the party to be named in the notice of appeal, the Rules require that the noti

ce be timely filed. "In an appea l as of right to th e Supr eme Court, Court of Appeals or Court of Cri minal Appeals, the notice of appeal required by Rule 3 shall be filed with and rec

eived by the clerk of the trial court within 30 days after the date of entry of the judgment appealed from." Tenn. R. App. P. 4 (a). This court has held that the time limit is ma nda tory and jurisdictional in civil cases. Jefferson v. Pneumo Servs. C orp. , 699 S.W.2d

181, 184 (Tenn. Ct. App . 1985). The Te nnessee Rul es of App ellate Procedure specifically

provide that the

Court of Appeals can neither waive nor extend thi s time period. Tenn. R . App. P. 2 advis ory comm ission cmt. (addressing waiver); Tenn. R. App. P. 21(b) (address ing extension of t ime).

In a recent case, our court addressed the specific issue of "whether t he absence of a party's na

me from a notice of appeal i s the type of informality that will n ot affectthe party's standing as an appellant." Town of Carthage, Tennessee v. Smith County , No. 01-A-01-9308-C H 00391, 1995 WL 92266 at *3 (Tenn. Ct. App. 1995). Concl uding that the failure

to specify a par

ty in the notice of appeal was not a n excusable inform

ality , the court stated as foll ows:

To be considered an

appellant, a party mu st file a timel y notice of appeal in its own name,

or it mus t be nam ed as an appellant in a timely joint notice of appe

al filed in accorda

nce with Tenn. R . App. P. 16(a). Parties who do neither are simply not before the court as-5- appellants. Id. at *4.

In light of this law, we conclude that Joyce Galbreath is simply not before this court as an appellant regar ding the issue of the Rule 11 sa nctions and the issue of Mr. Lawless's negligent misre presentation and induc

ement of contract breach. By not filing a notice of appeal until Fe br uary 18, 1997, Joyce Galbreath failed to appeal in a timely manner the tri

al court's judgm

ent with regard to these issues which the trial cou rt made final by order dated October 28, 1996. Furthermore , the two notices f iled in Novembe

r of 199 6 by Ch arles G albre ath are insufficient t o preserve the right

of appeal for Joy

ce Galbreath. Therefore, these issues will be reviewed as between Mr. G a lbreath and Mr. Lawless and the Bank. On the other hand, by the notice of appeal she file d on February 18, 1997, Joyce Galbreath has preserved her right to appeal the January 22, 1997 judgment gr

anting summa

ry judgme

nt to Mr. McGaugh a

nd de nyin g the same to the G

albreaths. II. Breach of Contract We turn next

to the issue of

contract breach as between Charles and Joyce Galbreath and James McGaugh. These proceedings began in the trial court when Mr. McGaugh sued for specific perf orman ce of the contract between these pa rties

. By Order dated January 22, 1997, the court granted Mr. McGaugh's Motionfor Summ

ary Judgmen

t which entitled him

to specific perfor

mance of the contractfor sale of the Pr o perty. In its o rder, the court st

ated that "the title exceptions have been cured per the record and are no longer subject to objection by the purchaser." On appeal, the iss ue is whe ther Mr. Galbreath did indeed breach the contract

by his failure to clea

r the title or whet

her, as Mr. Ga

lbreath asserts, Mr. McGaugh breachedthe contract by his failure to tende

r the purchase price on January 1, 1996

.

The contract provided that Mr. Galbreath was to convey by "g ood an d validwarranty dee

d" the Property

with the sale to

close on January

1, 1996. The contractincluded the followi ng form language : "This contract is contingent upon buyer's ability to qualify for a new loan whenever a n ew loan is a part of the-6-

terms of this contract. Buyer agrees to make said loan application on or before ___." The blank had been filled in with the typed words "already arranged." As stated, a dispute

arose when Mr. Lawless advised his client, the Bank which had approved a loan for Mr. Mc Gaugh, that there

were problem

s with the title of th

e Proper ty. In a letter from

Mr. Lawless to

Mr. Galbreath's then attorney, Thomas Stewart, Mr. Lawless stated that Mr. Galbreath faxed a warranty deed on January 2, 1996. When confronted on that same day about the poss ibility of an optio n heldby a bankruptcy trustee for Diversified,

Mr. Galbreath t

ook the position

that there was no problem and as serted that "even if there was a cloud i

n the chain of title, he 'was good for

any damages, even though he could not conceive

of any.'"

Initia lly, we point out that both partie s waived the ability to rely on the closing date of the contract. Mr. Galbreath first fax ed the warr anty deed on January 2, 1998, one day subsequent to the date of closing specif ied in the contract. Because the parti es were obvious ly not re lying on the contract date, they had a reasonable time in whi ch to close. First Am. Tru st Co. v. Franklin-Murray

Dev. Co. , 925 S.W.2d 545, 547 (Tenn. Ct. App . 1996). Next,

we conclude that Mr. M cGaugh did not breac

h the contr act by refusing to purchase the Property on January 2, 1996 af ter Mr. Galbreath f

axed him the warranty deed. The contract stated that it was contingent upon Mr. McGaugh's ability to qualif y for a new loa

n. Though the bank issu ed a letter of inte

nt approving such a loan, this letter was conditioned upon the loan being secured by a first lien and upon the Ba nk rec eiving a deed of trust. Regardless of th e accuracyof Mr. Lawless's advice regarding the cloudedtitle, the bank's r eaction to this advice affected Mr. McGaugh's ability to obtain t he loan from the

Bank and thereby

relieved Mr. McGaugh of his obligation under the contract.

The fact thatthe contract provides that the buyer' s agreement to make the loan a

pplication had already been arranged does not alter our finding. This

language goes to the buyer's (here Mr

. McGaugh's) responsibility to initiate the loan process which had in fact "already

been arranged." The contingency that Mr. McGaugh

qualify for the loan rem

ained a part of the c

ontract.

However, it is no t disputed that, wha tever may have been defects i

n the title, they have since

been c lea red to the satisfaction of the Bank such that Mr.-7-

McGaugh

is not only willing

but able to p urcha se under the contract. Once cleared wi thin a reasonable tim e, Mr. McGaugh

still had the right unde

r th e contractto purchase the Pr oper ty. Id. In light of Mr. Ga lbreath's refusa

l to transfer the Property, we find that the trial court did not er

r in awarding speci

fic performance. The remedy of specific perfo

r man ce rests within the

sound discretion of the trial court

and upon the particular facts of each case. Shuptrine

v. Quinn , 597 S.W.2d 728 , 730 (Tenn. 1979) . "[S]pecifi c performanc

e is regarded as appropriate whe n dealing with

contracts for the c

onveyance of

real property because real prope

rty is unique, a

nd more often tha

n not, an award of damages is simply not an adequate remedy." GRW Enterprises, Inc

. v. Davis , 797 S.W.2d 606, 614

(Tenn. Ct. Ap

p. 1990). "[T] o sup port such relief the contractmust

be clear, com

plete and definite in all its essential terms. The Court will not make a contr

act for the parties and the agreem ent sought

to be enforced specifically m

ust show beyond doubt that the minds of the parties actually met and that they themselves made the agreement." Parsons v. Hall , 199 S.W.2d 99, 100 (Tenn. 1947) (cit ing Gibson's Suits in Ch., 1937 Ed., § 949).

I n the instant case, the contract concerned the conveyance o f a uniqu e piece of real property

on which is situated a commercial doughnut bakery run by Mr. McGaugh. Furthermore, the contra ct's e ssential terms

were clear and complete leaving no doubt

that the parties' m

inds had actually

met regarding

the transfer of this property . Thus, specific performance

of this c ontr act is the adequate reme

dy for Mr. Mc

Gaugh. III. Negligent Misrepresentation or Inducement to Breach a Contract The majority

of Mr. Galbrea

th's appellate arg

ument does not involve the defendant Mr. McGaugh at all. Rather, Mr. Galbreath focusses on his third-party complaint

against the Bank and i

ts attor ney Mr. Lawles s in wh ich he claims Mr. Lawless gave inaccurate advi ce which caused Mr. M cGaugh to breach the contractbetween himse

lf and Mr. Galbrea

th. It is undisputed that Mr . Lawless advis ed his clients that the ti tle of the Property

was clouded by a

n o ption t o purchase the Pro perty he ld by t h e bankruptcy tru stee for the sub-le ssor Diversified. On the one hand, Mr. Galbreath has challenged the

competency

of Mr. Lawless's advic

e by arguing that the option to purchase the landwas held by Mr. McGaugh as the sublessee of Diversifi ed because a covena

nt conferring

an-8-

option to purchase runs

with the land and passes with an assignment of a lease. Still at other tim

es, Mr. Galbre

ath has expressed his

opinion that the

option as held by Diversified, which was in the amount of $ 250,000 ($70,000 more than the McGaugh-Galbre

ath contract price

) only impro

ved Mr. McGaugh' s position

as he stood to make $7 0,000 should the bankruptcy trust

ee exercise the op

tion. Regardlessof these very di fferent p osition s, Mr. Galbrea th has consistently asserted that by advising his client that Diversified ha d any interest in the proper ty, Mr. Lawless c

ommitted th

e torts of negligent m

isrepresent

ation a nd inducement

of a br each of contract.

Moreover, Mr. Galbreath claim s that by granting summary

judgment, the

court prevented the

factual issue of

whether Mr. Lawless acted n eglige ntly fro m being d etermine d by a jury.

We findthat the trial court did not err in

dismi ssin g Mr. G albre ath's claims against Mr. Lawless. Mr. Lawless has thoroughly briefed his position in support of the competency of his advice regarding the cloud on th e title. From the record, it is apparent that Mr. Lawless was diligent in arriving at his opinion. In

aletter to Mr. Galbreat

h's attorney,

Mr. Stewart,

Mr. Lawless

stated that he had contacted the bankruptcy trustee who opined th at the lease and option wer e the property of the bankruptcy estate. In documents bef ore the court, Mr. Lawless cited statutory and case law in support of his opinion that the m ere existence of the option coupled with the pending bankruptcy of the record holder of that option created a cloud on

the title. See 11 U.S.C. § 541(a)(1) (1993) (stating that

abankruptcy esta

te includes "all legal or equitable i nterests of the debto

r in property as of the com

menceme nt of the case"). M

r. Galbreath ha

s failed to presen t a conv incing argument to the c ontrar y.
However, regardless of the proficiency of M r. Lawl ess's counsel, Mr. Galbreath fails to show

that he could recover

against Mr. Lawless under either theory advanced by Mr. G albreath. First, we turn to the tort of negligent misrepresenta

tion which is outlined in S ection552 of the Restatem ent (Second) of Torts as follow s:

(1) One who, in the co

urse of his business,

profession or employm ent, or in any other tr

ansaction in which he

has a pecuniary interest, supplies false infor matio n for t he guidance of other s in their business transactions, is subjectto liability for pecuniary loss-9- caused to them by the

ir justifiable reli

ance upon the inform

ation, if he fails to exercise r

easonable care or

competence in obtain ing o r communicating the information

. ( 2) Except as stated in

Subsection (3), the

liability state

d in Subsection (1) is limited to loss suffered (a) by the person or one of a limite

d group of persons for whosebenefit and guidanc e he intends to supply the information

or knows that the

recipient intends to supply it; and (b) through reliance upon it in a transa

ction that he intends the inf

orm ation to influence or knows that the recipient so int en ds or in a substantially similar transaction. Robinson v. Omer , 952 S.W.2 d 423, 427 (Tenn. 199 7) (citing Restate

ment (Second) of Torts, § 552 (1977)). There need not be contractual privity between the plaintiff and defe

ndant (here the

cross-plaintiff and cross-defendant) as long as the following cr

iteria are m

et: (1) the defendant

is acting in the course of his business,profession, or employment, or in a transaction in which he has a pecuniary (as opposed to gratuitous) i

nterest; and (2) the defendant supplies faulty inform ation meant

to guide others in their business transactions; and (3) the defendant fails

to exercise reaso

nable care in obtain

ing or communica

ting the informa

tion; and (4) the plaintiff j ustifiably reli es upon the inform

ation. Id. (citing John Martin Co. v. Morse/Diesel, Inc. , 819 S.W.2d 428, 431 (Tenn. 1991)).
The problem he

re is that Mr. Ga

lbreath is not the rig

h t pl aintiff for a neglige n tmisrepresent

ation claim. Certainly, M r. Lawless wa

s acting in the

courseof his profession as a n attorney is

advising the Bank and therefore Mr. McGaugh

about the clouded title . Assu ming a rguendo that this advice was "faulty information" a

nd that Mr. Lawl

ess failed to exerc

ise reasonable

care in obtaining it, it was not given for Mr. Galbre ath's benefit

nor did he doanything in reliance on this advice . The suprem e court noted that w

hen courts have allowed non-clients to recover under the theory of neglige

nt misreprese

ntation, ithas been situations w here "the advice w

as given for the gu

idan ce of the plaintiffs in the course

of the real estate transaction and reliance upon that advice

was justifiable and foreseeable." Robinson v. Omer , 952 S.W.2d 423 , 4 27-10-

(Tenn. 1997) (citing Collins v. Binkley , 750 S.W.2d 737 (Tenn.1988); Stinson v. Brand , 738 S.W.2d 186 (Tenn.1987)). While Mr. Ga lbreath may

have been affected, he did not "justifia bly rel[y] upon the informa tion" and therefore

cannot recover against Mr

. Lawless under

a theory of negl

igent misrepresentation.

We next turn to evaluate Mr. Lawless' s liability under a th eory o f "Inducement

of Breach of Contract" which is outlined in Tennessee Code Annotated section 47- 50-109 as follows: Itis unlawful for any person, by induc

ement, persua

sion, misrepresenta

tion, or other means , to induce or procure the breach or violation, refusal

or failure to perf

orm any lawful contract by any p arty thereto; and, in ev

ery case whe

re a breach or viol

ation o f such c ontract is so procure d, the person so proc

uring or inducing the same sh all be liable in treble the amount of dam

ages resulting from or incident to the breach of the contract. The party inj ured by such breach ma

y bring suit for th

e breach and for su

ch damages.
This court has stated tha t "[b]efor e recovery can be had under T.C.A. Sec. 47-50-109, seven ele

ments must b

e proved: 1. There mus

t be a legal contrac

t. 2. The wrongdoer

must have

knowledge of the

existence of the co

ntract. 3. There mus

t be an intention to induc e its breach. 4. The wro ngdoer must hav e acted ma liciou sly. 5. There mus

t be a breach of the

contract. 6. The act complained

of must be the pr

oximate cause of the breach of the contract. 7. There must have been damages resul ting from the br

each of the contract." Hodges v. Reid , 836 S.W.2d 120, 124 (Tenn. Ct . App. 1 992) (ci ting Dynamic Motel Management, Inc. v. Erwin , 528 S.W.2d 819, 822 (Tenn. Ct. App.1975)). Several of these cri te ria are missing in this case. Most significantly, as stated above, we find that Mr. McGaugh did n ot breach the contract. He delayed performance

until title was cle

ared within a rea

sonable time at

which t ime he attempted to per form under

the contract. In addition, there has been no allegati on that Mr. Lawless acted malic iously or with the

intent to induce the contract's breach but only t hat he was carry

ing out his duty to research tit le as hired by the Bank to

do. Indeed, Mr. Galbreath s tates in his brief tha

t "[i]t is not charged that Lawless inte ntionally harm

ed anyone. He

simply m ade a mistake, undoubtedly

in a misguided ef

fort to help his clien

t." In addition,

in a Motio n-11-

to Reconsider filed June 28, 1996, Mr. Galbreath asserted that he had never "intimated

. . . that Mr. Thomas Lawless was in a m annerless than a

competent, respected attorney," but rat her that he had made a mistake. In light of Mr. Galbreath's failure to prove the elements under

this cause of action,

we find that the court did not err in dismissing the third party complaint against Mr. Lawless.

IV. Rule 11 Sanc

tions Finall y, we address the trial court's decision toimpose Rule 11 sa nctions

on Mr. Galb reath and his wife on account of their c

laims against Mr

. Lawless. In its August 1, 1996 Order, the court made an initial finding that these clai m s "were not founded in Law or in Fact and are without merit, that there was and is

no basis existing for the claims against Lawless and as a consequence the Court finds that the claim

s again st Lawless are frivolous and br ought in violation of Rule 11. " At Mr. Galbreath's request, the court held a separate evidentiary hearing pursuant to Rule 11. F ollowing the hearing,

an order was ente

red on October 28, 199 6 in which the court f ound that Mr. Law

less had carried hi s burden of showin g by clear and convincing proof that Galbreath had violated Rule 11. The court then re inst ated its "prior sanction awarded against Charles F. Galbreath and

Joyce L. Galbreath of $2,500.00 to deter the wrongful conduct of Galbreath in the f

iling and continued prosecution

of the frivolous law suit and claims against Lawless and First American."

In his brief, Mr. G

albreath claim

s that even if there

is no basis for his tort action, it can not b e considered frivolous. Mr. Galbreath claims that after researching

the applicable law, he believedthat Lawless's r epresentation that t

he title was defective

was the negligent act that caused the breach of contract by Mr. McGau gh. Mr. Galbreath c laims that the c

ourt failed to give r

easons for its conclusions regarding

Rule 11 despite the ex

plicit language of

Rule 11.03 which provides that"[w] hen imposing sanctions, the court shall describe the conduct determined

to constitute a violati

on of this ru le and explain the bas is for the sanction imposed." Tenn. R. Civ. P. 11.03(3).

The Tennessee Supreme Court has stated that "[t]he cert ifica tion which results from the

attorney's sign

ature on a motio

n, pleading, or other docume nt is-12-

directed at the three substan tive prong s of Rule 11: its factual basis, its legal basis, and its legitimate purpose. . . . A signatur e signifies to the Cour

t that the signerhas read the

pleading, motion, or other paper, has conduct

ed a reasonable inquiry into the facts

and the law, and is sat isfied that the docum

ent is well-grounded in both, and is acting without any improper motive." Andrews v. Bibl e , 812 S.W.2d 284, 287

(Tenn. 1991). "T

he test to be applied i

n deciding whether an attorney's conduct is sanctionable, is one of objective reasonableness underall the circumstances . . . and the re asonableness of the attorney's belief must be assessed in light

of the circums

tances existing at the

time the docum

ent in question was signed." I d. at 288. Because such a determination involves "'fact-intensive, close calls' . .. appellate court s review Rule 11 unde

r the 'abuse of discretion' and 'de

ferential' st

and ard." Krug v. Krug , 838 S.W.2d 197 , 205 (Tenn. Ct. App. 1992) (cita tions omitted).

As we held above, Mr. Galbreath faile d to prove his claim

s for negligent misrepresenta

tion and inducement t

o breach a

contract against

Mr. Lawless a

nd therefore, the lower court w as correct in dism

issing these claims. The

question for the trial court in finding a violation of Rule 11 was whether or not Mr. Galbreath's beliefs concerning these causes of ac

tion were reasonable

in light of the circumstances existing at the time that he signed documents making such allegations. For the following reasons, we hold that Mr. Galbreath's beliefs were not reasonable and

that the court did not a

buse its discretion in f

inding that Mr. Galbreath's claims against Mr. Lawless w

ere frivolous and m

erite d Rul e 11 sanctions.

Mr. Lawless and the Ba nk were f irst brought into this la

wsuit as cross defendants by Mr. Galbreath i n his "Answer and C

ounter-Compla

int" filed May 15, 1996. In that document, Mr. Galbreath alleged the Bank, acting through its agent Mr. Lawless,

refused to approve M r. McGaugh's loa

n in light of Diversified's option to purchase the land and thereby induced Mr. McGa

ugh to breach the contract. How ever, there is no r

eference to the la

w which supports Mr. Galbreath's cr

oss-claims othe

r th an that found in a June 28, 1996 " Motion to Reconsider." In this document, M r. Galbreath

simply quote s the definition of "Negligent

Misrepresentation" as a rticulated in the Restatement (2d) of Torts.-13-

Mr. Galbreath never cites any law rela ted to the issue of

contractual privity

in a negligent misrepresentation case. Nor does he cite any law o

n "Inducement of Breach of Contract." Finall y, in the documents in the record where Mr. Galbreath's third-party claims are mentioned, there is very littleanalyses of the facts of this particular cas e to the law. Rather, Mr. G albreath's third pa

rtyclaims

consist primarily of unsupported allegations that Mr. Lawless "induced a breach of contract" and

made "negligent misrepresentations." Based upon this record, we cannot say that Mr. Galbreath's conduct was objectively reasonable. V. Conclusion After a careful revie

w of the record be

fore us, we find t

hat thetrial court's judgment should be affirmed. As the court found, Joy ce Galbreath

preserved her right to appea l the lower court on ly in its finding invo

lving the breach of contract

. Regar ding this issue, we f ind that the court belo

w was correct i

n granting specific perform ance to the plaintiff, Mr. McGaugh. Finally, we agree withthe lower court that there was no merit to Mr. Galbr eath' s thi rd-pa rty cla ims against the Bank and Mr. L

awless. Not only

were these clai

ms without m

erit, they did not

have a sound legal or factual basis.Consequently, t he court did not

err in imposing Rule 11 sanctions on Mr. Ga lbreath for

his conduct. In light of

our findings, the decisi

on of the trial court

is wholly affi

rmed and the costs of appeal are taxed t

o the defendant Mr.Galbreath.

________ _ _____________________ _ WALTER W. BUSSART, SPECIAL JUDGE

CONCUR:

__________________________________ HENRY F. TODD, PRESIDING JUDGE

__________________________________ WILLIAM C. KOCH, JR., JUDGE