# FILED

March 12, 1997 Cecil W. Crowson Ap pellate Cou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE WE ST ER N S EC TION AT N AS HVILLE

______________________________________________ FRANK RUDY HEIRS ASSOCIATES, SHONEY’S INN OF MUSIC VALLEY, LTD., Plaintiff s-Appell ees, Dav id son Ch anc ery No . 93 -29 57- II Vs. C.A. No. 01A01-9607-CH-00315 SHOLODGE, INC., Defend ant-App ellant.

_____________________________ ______________________________________________ _ FROM THE

DAVI DSON COUN

TY CHANCE

RY COURT THE HONORABLE EL

LEN HOBB S LYLE, CHA NCELL OR

Charles Pa

trick Fl ynn , Gerald

D. Neen am of Nas hville For Plaintiffs-Appellees Eug ene N. B ul so, Jr . of

Bou lt , C um mi ngs , C onn ers & Ber ry, P LC of Nashville, for Defendant-Appellant

REVERSED A ND REMANDED Opinion fi led:

W. FRANK CRAWF ORD,

PRESIDIN G JUDG

E, W.S.

CONCUR: DAVID R. FARMER, JUDGE BEN H. CANT RELL, JUD GE1 The complaint sues Moore & Associates, Inc., Leon Moore, and Sholodge, Inc . for

breach of fiduciary duty, breach of contract, fraudulent concealment, constructive fraud, reckless or intentional misrepresentation in a business transaction, tortious inferenc e with a contractual rela

tionship, c onspiracy, and als o seeks a n accou nting. Thisappeal involves on ly an actio n for bre ach of c ontract

. 2 This appeal basically

involves the interpretation of a con tract. Def endant, Sholodge, Inc., appeals fro m the orde

r of the tr ial cour t grant ing par tial summa

ry judgmen t to the pla

inti ff , Shoney’s Inn Of Music Valley , Ltd. The trial court ruled that Sholodg e b reached its Limited Partner ship Agreement with Frank Rudy Heirs Associates, and, therefore, g rante d partial summary judgmen t to Shoney’s I

nn of Music Valley, L

td. (Partnership). The trial court referred the issue of damages to a Special Master. The tria l court confirmed the r eport of the Special Master and awar ded damag es of $3,045,031.00 to the Partnership. The order was made fina l pursuant to Tenn.R.Civ.P. 54.02 and Sholodge has appealed. Frank Rudy Heirs Associates f

iled this lawsu

it for itse lf and on behalf of the Partnership. 1 The material facts are not in dispute. Another cause of action set out in the complaint

was before

this Court p

reviousl y, a nd the bas ic backg

round fa cts are succinctly

stated in Frank Rudy Heirs Assocs. v. Moore & Assocs., 919 S.W.2d 609 (Tenn. App. 1995) which we quote:

Four members of the Rudy family inherited a

piece of land on Music Valley

Drive in Nashville, a popular

tourist area. In 1986, Gulf Coast Development, Inc. (GCD), an owner and operator of Shoney’s Inns, proposed to buy the property a

nd erect a hotel on it. The he irs did not want to give up the property , and so the parties e ntered into a limited partnership agreement by which GCD w as able to build a Shoney’s I nn on the property, a

nd t h e Rudy heirs ac quired a

40% inter

est i n the pr oposed hotel enterprise, as well as a $40,000 a ye ar ground lease agreement for the use of the land. Gulf Coast Development became the gene ra l p artner, and retained a 60% interest . The par

tnership was called Shoney ’s Inn of Opryland, L

td. The name was later c hanged to Shoney ’s Inn of Music Valley, L

td., and GCD later became Sholodge, I nc. The August 4, 1986 partnership agreement recited that it s execution coincidedwith the act ivati on of a managem ent agr eemen t betweenthe partnership and the genera l partner, whereby

the general partner would receive a fee of 6% of revenues for managing the affairs of

Shoney’s I

nn of Opryland. 919 S.W.2d at 610. In the Limited Partners h ip Agree ment, Sholo dge and Ru dy Heirs w ere allo wed to compete withthe Partnership, but Sholodge could not acquire an “ownership interest” in another2 The development agreement was exec uted by Howard Johnson Development V, Inc., a wholly owned subsidiary of Prime. 3 hotel. The

Limited Pa

rtnersh ip Agree ment provides in pe

rtinent pa rt: 5.7 Independent Acti vities. The General Partner and the Limited Partners may, notwi thstanding the existence of this Agreement, engage i n whatever activities they choose, whether or not such activities be the same as, s imilar to, or competitive with the business of the Partnership, without having or i ncurring any obli gation to account to the Partnership in

connec tion there

with or to o ffer a

ny intere st in such activitie s to the Par tnership or any pa rty hereto, and, as a mater ial part of the consideration for the Genera l Partner’s execution h ere of and fo

r the adm ission of th

e Limited P artner s, the Limited Partners hereby waive, relinquish and renounce any such rig ht or c laim of participation. Notwithstanding the foregoing, the General Partner hereby agr ees that during the term hereof it will not acquire an ownership i nterest in a motor hotel facility within one (1) mile of the Inn or within one quarter (1/4) mile on either side of Briley Parkway from McGavock Pike t o Leba non Pike without first offering such interest to th e Partnership. On July 10, 1989, Sh olodge en tered in to a hotel developm

ent agreement wit

h Prime Motor Inns, Inc. 2 (Prime). Sholodge and Prime agreed to develop at least 10 A

meriSuite s hotels in the first year of the agreement, and then 10 A meriSuites hotels per year each year until 1994. Sholodge identified possible sites for the A meriSuite s and submitted deve lopment pr

oposals to Prime. If the po tential site was ac ceptabl e to Prime, Sholodge negotiated a purchase agreement and then acted as an independent contract or for c onstruction of the hotel. Finally, Sholodge managed the hotel

after c ompletion. Prime wasresponsi ble for finan cing at all stages of developm ent. Sholodge locatedan acceptable site for an AmeriSuites hotel in Nashville in accordance with the hotel development agreement with Prime. The site was located next to the Shoney’ s Inn owned by the Partnership. Primedid not wa

nt to hold the title to th

e site dur ing constr uction fo r accou nting rea sons. Therefore, Sholodge formed a new cor poration , SuiteEqu

ity, for th e purpose of holding

titleto the property where the AmeriSuites hotel was built. SuiteEquity was capitali zed with $1,000.00 in cash, the minimum permitted in Tennessee. Prime loan ed S uiteEquity the amount of the purchas e price to acquire the prope rty . SuiteEquity purchased the real estate and began3 Moore & Associates, Inc., a subsidiary of Sholodge, actually constructed the

AmeriSuit

es.

4 The comp laint wasfiled ag ainst Moor e & Associ ates, Inc., Leon Moore, a nd Gulf Coast Development, Inc. Gulf Coast is the predecessor of Sholodge. Rudy Heirs filed the complaint for itself and on behalf of the Partnership.

5 Rudy Heirs also demanded a complete accounting, and it alleged br each of fiduciary duty, fraudulent concealment, constructive f raud, reckless or intentional misrepresentation in a business transaction, tortious interference with a contractual relation ship, and c onspiracy. These causes o f action

are not b efore t

he Court in

this appe al. 4 construction. 3 Also with funds provide by Prime, the AmeriSuites hotel opened for business on July 13, 1990. After the opening, Sui teEquity c onveyed the property to Prime in return for forgive ness of the loan for the purchase price a nd construction. S holodge managed the hotel after it opened. Sholodge did not offer any part of this opportunity to the Partnership. Rudy Heirs initially filed a complaint against Sholodge in the Chancery Court for Sumner County. 4 Though it is not entirely clear from the record, it app ears from the br iefs and oral argument that the c omplaint in

that cas e allege d virtuall y the same

causes o f actio ns as t

he complaint in the case before

us. During the course of the jury trial, the chancellor, in ruling on

a motion in lim

ine on October 7, 1993, stated from the bench that he was of the opinion tha t Sholodge “did

not acquire an ownership interest in a motor hotel facility within one mile of the Inn o r within

one quar ter of a mile on eit

her side of Briley Parkway from McG avock Pik

e to Lebanon Pike .” N o written order was entered on this ruling and subsequently on October 11, 1993, Rudy

Heirs too k a volunta

ry nonsuit

. On March 11, 1994, Rudy Heirs refiled the complaint in the C hance ry Court for Davidson County. Rudy Heirs again alleged, inter alia , that Sholo dge had a

n owners hip intere st in the AmeriSuites within one mile of the S honey’s Inn in violation of paragraph 5.7 of the Limited Partner ship Agre ement. 5 Sholodge d enied the materia l al legation s of the c omplaint. Both Sholodg e and Rudy Heirs fi led motionsfor summa ry judgme

nt on the va

rious cou nts. The trial cou

rt grante d partia l summa ry judgment to Rudy Heirs on the question of breach of the Limited Partnership Agreement, and found that “Sholodge, Inc. violated paragraph 5.7 of the Limited Pa

rtnersh ip Agree ment, and

that the Partnership is entitled to recover from Sholodge, Inc. damages for the said breach.” The trial court then referred the issue of damages to a Special Master for determination.5 A hearing was held before the Special Master on August 3, 1995. The Special Master issued a report to the trial court on November 8, 1995. The Special Master found that Sholodge owedthe Partnership $3 ,045,031. 00 as a re sult of the developm

ent and ma

nagemen t agree ments betweenSholodge and Prime. Sholodge objected to the Special Master’s report on November 20, 1995. On D ecembe

r 27, 1995 , the tria

l cour t overruled Prime’s objection, approved and confirmed

the Special Master’s report, and awarde d a judgment to the Partnership in the amount of $3,045,031.00. By agreed order entered Marc h 14, 1996, the trial court declared that th e portion of the December 27, 1995 order conc erning the breach of paragra ph 5.7 of th e Agreement was final pursuant to Tenn. R. Civ. P. 54.02. Sholodge has appealed and presents the following issues for our re view: 1) whether the Chancery Court for Sumner County’s ruling tha t Sholodge d id not breach paragraph 5.7 of the Limited Partnership Agreement preclude s that claim in this action; 2) whether Sholo dge’s dev elopment and mana

gement of

an Ameri Suites Hote

l in Nashvi lle violated parag raph 5.7 of the Limited Partnership Agreement; and 3) whether the trial cour t’s confirmation of the Special Master’s report should be set aside. In th e first issu e, Sholodg e asser ts that Rudy

Heirs is p

reclude d from ra

ising the sa

me claim that was dismissed in the original suit in the Chancery Court for Sumner County. In the first suit, the chancellor stated, as a matter of law, that Sholodge did not acquire an owner ship interest in a motor hotel fa

cility in vi olation of

paragr aph 5.7 of

the Limite d Partner ship Agreement. The chancellor made this ruling from the bench, but did not enter a written order. Rudy Heirs then nonsuited the case which was dismissed without prejudice. Sholodge asserts t

hat Patterson v

. Ridenour , 263 S.W.2d 537 (Tenn. 1 953), co ntrols this dispute, a nd that u nder Ridenour the statement of the chancellor from the bench should be sufficient to invoke the doctrine of res judic ata . We do not find it necessary t o addres s this assertion, because Ridenour was d ecid ed prior to the ado

ption of Te

nnessee Rules of Civ

il Procedure, and we be

lieve the case before us is controlled by the present rules. It is undisputed that the case on trial in the Sumner County Chancery Court involved multiple claims, and it is also undispute d that the

chance llor’s be nch rulin g pertained to only one c laim in litigation. Even assuming that we c ould consi der the c hancell or’s ora

l ruling asa

valid order, t he parti es are s till6

left with an interlocutory order subject to rev ision at any time prior to “entry of the judgment adjudicating all the cl aims and th e rights a nd liabilit ies of all the part ies.” Te nn.R.Civ.P. 54.02.

Obviously

in the case before us there has been no compliance with Tenn.R.Civ.P. 58 pertaining to entry of

final judgment, nor under any stretch of the imagination has there been any compliance with the provisions of Tenn.R.Civ.P. 54.02 for making an interlocutory order a final order and appealable as of right. See Fox v. Fox , 657 S.W.2d 747 (Tenn. 1983)(holding that there must be certification by the trial judge that there is no just reason for del ay and that the court has dire cted the

entry of a fin al judgment). Even if we could give the chancellor’s ora l pronouncement

from the bench the dignity of an order, it would be only an interlocutory order and, for res judic

ata or colla

teral e stoppel to apply, the judgment in the prior case must have been final. See Richar

dson v. Tennessee Bd

. of Dentis try , 913 S.W.2d 446 (Tenn. 1995). A voluntary nonsuit is not an adjudication of “all the claims and the rights and liabilities of all the parties.” Tenn.R.Ci v.P. 54.02. Thus, upon dismissal, any inter

locutory orders a re mere ly part of the pr oceedings dismisse d and hav e no binding effect. This issu e is withou t merit. In the second issue, Sholodge argues that it did not violate paragraph 5.7 of the Limited Partner ship Agreement because it did not acquire an ownersh ip intere st in the AmeriSuites near the Shoney’s Inn. A trial court should grant a motion f or summary judgm ent when the movant demonstrates that there are no genuine issues of material fa ct, and that the moving party is ent itled to a judgmentas a matter of law. Tenn. R. Civ. P. 56.03. The phra se "genui ne is sue" as sta ted in R ule 56.03 refers to genuine factual issues, and does not include issues involving legal conclus ions to be dra wn from the facts. Byrd v. Ha ll , 847 S.W.2d 208, 211 (Tenn. 1993). A motion for summary judgment can provide a quick and inexpensive means to dispose of cases where only legal questions and not material facts are at issue. Brookins v. The Round Table, Inc. , 624 S.W.2 d 547, 550 (Tenn. 198 1); Ferguson v. Tomerlin , 656 S.W.2d 378, 382 (Tenn. App. 1983). Our review is de novo on the record with no presumption of the c orrectness of the trial court's conclusions of law. Union Plante rs Nat'l Bank

v. Americ

an Home Assurance Co. ,7

865 S.W.2d 907, 912 (Tenn. App. 1993). The interpretation of a written agreement is a matter of law and not

of fact. Rainey v. Stansell , 836 S.W.2d 117, 118 (Tenn. App. 1992). In Rainey , this Court discussed the rules for the inter pretatio n of contr

acts: The cardinal rule for interpretation of contracts is to ascerta in the intention of

the part ies and to give effect to that intention consistent with legal principles. A primary objective in the construction of a contract is to discover the intention of the parties from a co nsider ation of the whole contract. In construing contracts, the words expressing the parties' intentions shoul d be given their usual, natural and ordinary meaning, and neither party is to be favored in the construction. The cour t, in arriving at the intention of

the parties to a contract, does not attempt to ascer tain the parti es' state of mind at the time the contract was executed, butrather their intentions as actually embodied and expressed in t he contract as written. All provisions of a contract should b e construedas in harmony with each other, if such construction can be reasonably made, so as to avoid repugnanc y bet ween the several provisions of a single contract. Rainey , 836 S.W.2d at 118-119 (citations omitted). Where there is no ambiguity, it is the duty of the court to apply to the words used thei r ordinary meaning. Winfree v. Educat ors Credit Union , 900 S.W.2d 285, 289 (Tenn. App. 1995). In the absence of

fraud or mistake, a contract must be interpreted a nd enforced

as written

even though it c ontains te rms which may be thought harsh and unjust. Allstate Ins. Co. v. Wilson , 856 S.W.2d 706, 708 (Tenn. App. 1992). Althougha contract cannot be varied by oral evidence, the course of previous dealings, the circumstancesin which the contract was made, and the situation of the parties are matters properly to be looked to by the court in ar riving at the intention of the parties to the contract. Wilkerson v . Williams , 667 S.W.2d 72 (Tenn

. App. 1983). In Para gra ph 5.7 of the Limited Partnership Agreement between Rudy Heirs and Sholodge, Sholodge agreed not to “acquire an ownership interest in a motor hotel facility within

one (1) mile of

the Inn . . . without first offering such interest to the Partnership.” Theref ore, we must determine from the four corners of the Limited Partner ship A gr eement what the parties intended “owner ship inter est” to me an and wh

ether the Sholodge

agreem ent with Pr

ime establish es such a n intere st.6 The agr eement isactually

in the nam

es of the respec tive comp anies pr

ior to the n ame change s. For cla

rity, we h ave used

the pres ent name s of the c ompanies

.

8 The pertine

nt agree ment betw een Sholo dge a nd Prime is titled “Hotel Development Agreement,” and is between Prime, designated as owner an d Sholodge, des ignated as developer. 6 The pre amble to th

e agree ment state s the purp ose as fo llows:

PREAMBLE The pu rpose of

this Agre ement is to

set forth the terms an d conditions for the development of ho t els of the style defined as “Howard Johnson AmeriSuites” andother Howard Johnson hotel facilities by Owner an d Developer. The Developer will be responsi ble for the lo cation of

desirab le sites; the development of plans, specifications and construction budgets; and the c ons truction, equipping, staffing, and opening of “turn-key hotels” (“Hotel Development”). In this Agreement hotels shall be understood to include all their components such as land, buildings, furniture, fixtures, equipment and other items (“H otel” or “Hotels”). The Owne

r will be r esponsibl e for financing Hotel Develop ments in ac cordanc e with this Agreeme nt. The par t of the a greeme nt pertine nt to the c ontrover sy befor e us provi des: ARTICLE 6 HOTEL OPERATIONS; DEVELOPER’S PROFIT PARTICIPATION

* * * 6.5 De veloper’s Profit Participation in Cash Flow . T h e Developer shall be entitled to a Profit Participation in the

net profits from

operations equal to twenty-five (25%) percent of Net Cash Flow. Net Cash Flow will be determined on a fisca l year basis ending June 30th. On or before August 31 of each fiscal year the Owner will submit to the Developer a statement of operati o ns certified to by the Owner’s chief financ ial officer setting forth the Gross Revenues, the Exp enses, the Net Ca sh Flow, and the a

mount of Pr

ofit Parti cipation , if

any, to which the Developer

is entitle d, togethe

r with payment of su ch Profit Participation for the fiscal year reported upon. 6.6 Distribution of Proceeds on Sale and Refinancing

. A. The Developer shall be entitled to a Profit Participation of the net proceeds on sales and ref inancing s in accord ance with this Section 6.6. B. Th e proce eds of an y Sale, inc luding all c ash rec eipts, assets and/or property received, arising f rom or in connection with a Sale

of any Ho tel, will be

distribute d as follo ws:9 (a) To pay all expenses of the sale; (b) To pay principal and intere st o n the First Mortgage Financing; (c) To pay principal and interest on the Owner’s Investme nt; (d) To pay all other

Expense s to the ex

tent ther e is insufficient

cash flow from

operations (including principal and intere st on the Working Capital Fund and the Operating Advances); The balance (the “Net Sale Pro ceed s”) shall be p aid seventy-five (75%) percent to Owner and twenty-five (25%) percent to Develope r. C. The proceeds of

any Refin ancing including a ll cash re ceipts, assets and/or pro p erty received, arising from or in connection with a Ref

inancing of any Ho tel, will be

distribute d as follo ws: (a) To pay all expenses of the Refinancing; (b) To p ay princ ipal and i nterest o n the First Mortgage Financing; (c) To pay pr

incipal and in terest on Owner’s Investme nt; (d) to pay principal and interes t on the Working Capital Fund and Ope

rating Ad vances; The Balance (the “N e t Refinancing Proceeds”) will be paid seventy-five (75%) percent to Owner and twenty-five (25%) percent to Deve loper.

* * * Rudy Heirs as serts tha

t the prof it participation provision in the development agreement constitutes an “ownership interest” as contempl ated by the Limite d Partner ship Agreement. They argue th at an ownership in terest isrecogni zed in

a later option agreem

ent between Prime and Sholodge w

hereby S holodge isgiven the right to te rminate its “right , title, and interest in any and all of the Profit Participation in any one or more of the Participation Hotels.” Sholodge, o n the other hand, asserts that the Profit Participation provided in the development

agreement

is merely agreed compensation to Sholodge for its performance of the duties an d obligatio ns imposed upon it by vi

rtue of th e develo pment agr

eement. The Limi ted Partne rship Agreement recognizes the right of both Rudy Heirs and10

Sholodge to compete with the limited partnership. The extent of the allowed competiti on is quite expansive: “The General Partner and the Limited Partners may . . . engage in whatever activities they choose, whether or not such activities be the same as , s imilar to, or competitive with the business of the Partnership . . . .” The only limitation on this provis ion is quite

explicit: Sholodge agreesthat “it w ill not acq uire an o wnership

interest in a

motor hote

l facility within

one (1) mile of the Inn . . . . ” Considering the wide-open competition allowed, with the one limiting restriction, “ownership interest,” we conc l ude that t he parti es intend

ed “owne rship interest ” to be used

and unde rstood in a narrow sense. We find no ambiguity in this paragraph

o f the Limited Partnership Agreement, and if Rudy Heirs had not intended for “ownershi p interest ” to have a v ery limited meaning, it could have restricted Sholodge from developing, managing, or building any type of motor hotel facility within the t er ritory described in the paragraph. The term “ownershi p” has been “given a wide range of mea

nings, but i s often sa

id to comprehend both the concept of possession and, further, that of title and thus be broader than either.” Barron’s Law Dictionary 339 (3d ed. 1991) (emphasis in original). Black’s Law Dictionary defines “own” as “to have a good legal title; to hold as proper ty; to have a legal or rightful title to; to have; to possess.” Black’s Law Dictionary 996 (5th ed. 1979). The ordinary and usual meaning of

ownership is “possession” or “legal title.” The technical meaning of owner is “title holder.” In Uni on Carbide Corp. v. Alexander , 679 S.W.2d 938 (Tenn. 1984), the Sup reme Court, in considering the question of whether a corporation was the owne r of rea l propert y subject to proper ty tax, sta ted: In a proper

ty assess ment manu al (Inte rnati onal Association of Assessing Officers, Property Assessment Valuation (1977)) , it is said that there are six b asic rights ass ociated with the ownership of property: (1) the right to use; (2) the right to sell; (3) the right to lease or rent; (4) the right t o enter o r leave ; (5) the r

ight to give away; (6) the right to refuse to do any of these. 679 S.W.2d at 940. In the case before

us, Sholodge, by virtue of its management of the hotel, had the right to use and the right enter or leave the premises. Union Carbide h ad the same right, but our Supreme Court stated:11 As the Court o f Appea

ls pointed out, the r ight to ali enate is an importantelement of ownership. See 63 Am.Jur.2d Property § 47 (1972), at 331. Carbide has no inte rest under the contract that it can sell, lease, or otherwise transfer. The mer e use by Carbide of the rea l proper ty for purposes of performing the contract does not amount to an incident of ownership. 679 S.W.2d at

941. In the

instant ca se, Sholodge could not aliena te the pr operty no r could it prevent Prime from doing so. Rudy Heirs’s assertion essentially is that because Sholodge has a property interest in the profit participation, it has an ownership interest in the hotel, as contemplated by the Limited Partner ship Agreemen t . As we previously noted, our interpretation of Paragraph 5.7 of the Limited Partnership Agreement is that “ownership interest” is to be considered in avery narrow

sense in view of the language of the entire paragra ph. It is signif

icant tha t Sholodge h ad no risk of loss except the loss of anticipated revenue to be paid for its services. If the net cash flow of the AmerSuites was negative, Sholodge was not responsi ble for any s hortfall , although it would certainly not be entitled to any revenue. If the hotel was sold at a loss, Sholodge would not suffer any part of t

he loss, except

its loss of t

he reve nue. Fina

lly, Rudy He

irs points t

o Sholodge’s exerci se of the option to r

eceive a lump sum payment in lieu of continued percentage of profits. The fact that Sholodge negotiated what it thought was a more favora ble compensation plan does not automatically convert Sholodge from developer and manage r to an owner. We attach little significance to this turn of events. Considering th is record and the contract between the parties her eto in its entirety, we reach the conclusion that Sholodge did not hold an “owner ship inter est” in a motor ho tel faci lity within one mile of the Shoney’s Inn owned by the Partnership. Ac cordingly, the orde

r of the tr ial cour t granting summary ju dgment to Ru dy Heirs i s reversed, and the case is remanded to the trial court for entry of summary judgment in favor of Sholodge and for such further proceedings as may b e neces sa ry. The other issues are pretermitted. Costs of the appeal are assessed aga inst appellee.

_________________________________ W. FRANK CRAWFORD, PRESIDING J

UDGE, W.S. CONCUR:12

____________________________________ DAVID R.FARMER,

JUDGE

____________________________________ BEN H. CANT RELL, JUDGE