### IN THE COURT OF APPEALS OF TENNESSEE AT NASHVILLE Februar y 20, 2 002 Session DAVID L. SCHWAB v. DAVID E. MILLER, AN INDIVIDUAL, ET AL 

### . Appeal from the Chancery Court for Williamson County

No. 26484 R.E. Lee Davies, Judge

No. M2001-00932-COA-R3-CV - Filed June 7, 2002

The Chancery

Court of Williamson County held t hat in order to claim a major benefit of an employment

contract the employ ee had to be employ ed when the other conting encies in the contract were met. We affirm the lower court’s interpr etation. Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court

Affirme d and Rem anded
B EN H. C ANT RELL , P.J., M.S., deliv ered the opinion of

the cour t, in which P ATRIC IA J. C OTT RELL , J. and J OHN B. H AGLER , S P
. J., joined. Gerald A. Smith, Jr., Brentwood, Tennessee, for the appellant, Da vid L. Schwab.
H. Lee Bar

field, II , Coburn Dewees Berry , and Rebecca S. K ell, N ashville, Tennessee, for the appelle e, David

E. Miller, David E. Miller Developmen t Company , and MSB G

overnor s, LL

C.
OPINION
I.
In 19 87 David Sc

hwab beg an the de

velopmen t of a go lf course and resi dential c ommunity in Brentwood called the

Governor’s Club. After extensive work on the project, Mr. Schwab failed to obtain co nstructio n fin ancing. In 1995 he met David E. Miller, a re al estate developer, who proposedto revive

the project throug

h an entit y to be forme d by

Mr. Mille

r. Davi d E. Miller Development

Company then hired Mr. Schwab and put him in charge of the developm

ent. I nitially the parties o nly

had an or al agr eement. Almost

two years la

ter Mr. Schwab presented Mr. Miller a handwritten agreement including a provisi on that asa part of his compe

nsation Mr . Schwab w ould receiveLot

70 in the development “at closing.” Mr. Schwab followed up with a ty ped draft of an agreement

giving him first choice of any lots that Miller Development receiv ed in the d

evelopme nt. Mr. Miller did not accept these proposals.-2-

Nothing further hap pened f or another y ear. In April of 1998 Mr. Miller pr esented Mr. Schwab with a draft employme nt agreement. Mr. Schwab proposed an a mendment that

would give him Lot 70 if he were ter

minated, but the parties continued to negotiate. Finally , on April 15, 1998, the parties executed a written agree ment which contained the following provision relative to Lot 70:
2. Compensation . In consideration of Schwab’ s performance of his duties as set forth in P aragraph 1 above, and in c onsideration of all prior contributions which Schwab has or may have made in connection with the Project, including any expenses incurred in connection therewith and any servic es rendered

relating to the Project, Schwab shall be compe nsated a s follows, so long a s this Agr eement isin fo rc e a nd Sc hw ab is an em pl oye e o f C om pa ny:

. . . . (iv) MSB currently owns, or has the right to acquire wi thout further consideration, Lot 70 (the “L ot”) in the Proj ect. MSB intends to hold the Lot and

to uti lize any proce

eds from the sale or other disposition thereof if nece ssary

to fund co sts and expe

nse s of the P roj ect . If MSB does not so sell or dispos e of the Lot at the time Owner has fully repaid a ll princ ipal, interest and expenses related to Owner’s first mortga ge fina ncing f or the Pro ject and all guaranties, collateral and other obl

igation s o f Owner’s members have been re leased by such first mor

tgag e lender

(or, if the same have previously

been called or drawn o r pa yme

nts have b een made

thereunder, all

amounts so called, dr awn o r paid, and all required returns thereon, have been repaid to such me

mber in fu

ll), then C omp a ny s hall cau se MSB to convey the L

ot to Schwab as additional consideration hereunder. The agreement also contained the f ollowing paragraph rela

tive to termination:
4. Termination . Schwab is as an employee at will and, accordingly may be terminatedby the

Company at any

time with or without cause. Upon any termination or upon Schwab’ s resig nation fo r any reason, Schwab sh all be pa id any amounts due throu gh the date of such

termination or

resignation (less any

amounts which Schwab may owe to the Compan

y) . Following any

terminat ion or re signati on, Schwa b shall notbe en ti tl ed to an y f ur ther compensation hereunder. Notwithstanding the foregoi ng, if

Schwab has been

terminat ed withou t cause a nd so long

as Schwa b is in full compliance with the provisions of Section 3 hereof , Schwab s hall be entitled to continue to rece

ive that p ercent

age of Net Cash Flow Distributions to which he has become entitled by the

terms of Section 2(iii)(b) above, following such termination. Ad di ti on al ly, Schwab sh all be entitled to rece ive a fou nder’s g olf membe

rship in The Governor’s Club Golf Club, provided MSB has the legal rig ht to deliver same.-3-

The original financ ing came fro m S out hTr ust Ban k of Ala bam a Na ti ona l As soc iat io n. It consisted of a construction and development loan and letters of credit serving as completion bonds forthe u tilities, r

oads, an d the go lf cours e. The lo an and le tters of c redit we re secu red by a first mortga ge on th e p ro pe rt y an d b y a guara nty si gned by

Mr. Miller and the Miller Family Trust. A li mi te d g ua ra nt y wa s a ls o e xe cu te d b y He nr y Cr ow n a nd Co mp an y. In June of 1998 the borrower replaced the construction and de velop ment par

t o f the fir st mortga ge with a loa

n from an

affilia te of Oak tree Cap ital. The

letters o f credit c on tinued to be secured by the first mortgage, although it does not appe ar that the secured parties ever had to draw on them.
In August of 1999, pursuant to the power under its agr eements with the developer, Oaktree terminatedthe Miller parties’ ties to the project. Mr. Schwab’s empl oyment with Miller Development

also ended on August 3, 1999. He was immediately rehire d by Oaktree

to continue with the pr

oject.
II.
The trial court

refused to award Mr. Schwab L ot 70 because the contingencies rela ting to his right to the lot w ere not s atisfied during h is employ ment. Mr. Schwab a

ttacks t he trial court’s decis ion on two or th

ree dif ferent fronts. F

irst, he a rgues t hat the wr

itten ag reemen t is si mp ly a memorialization of the prior oral a greem

ent. I n Mr. Schw ab’s ver sion of tha t agre ement he

is to receiveLot 70 and 25% of al l other money or prope rty removed f

rom the project by the

Miller entities a s compens ation for his prior c ontributio ns. We think Mr. Sc

hwab’s a rgumen t misses the

point. Ove

r an extended peri od of ti me Mr. Miller consistently rejected Mr. Schwab’s proposal that he get an unconditional promise to Lot 70. The written agreement places ce rtain conditions on that right. When the parties execute a written ag reemen t, all prior negotiations, promises, and understandings are merged into the c ontract

. Marron v. Scarbrough , 314 S.W.2d 1 65 (Tenn . Ct. App. 1958). The last a greem ent as to th

e same subject matter which is signed b y all the pa rties supercedes all former ag reements. Bringhurst v. Tual , 598 S.W.2d 620 (Tenn. Ct. App. 1980). Next, Mr. Schwab argues that the court misinterprete d t he agr eeme nt in holding that the contingencies to his right to receive Lot 70 ha d to be satisfied while he was still employed by the co mp an y. Parag

raph 2, h owever , provide s that Mr. S chwab “ shall be c ompensat ed as follows, so long as this Agreement is in force and Schwa

b is an employee

of Company.” F

our subparagraphs follow, each providing a part of his compensation pac kage. Subparagra

ph (iv) co nta ins the conditions under which he would get L ot 70. We think the only plausible construction of tho se provision s is the one

adopted b y the trial c ourt. Fi na ll y, Mr. Schwab argues that all the continge ncies were met prior

to his termination on August 3, 1999. I

t is undisp uted that

MSB still owned the lot, and it ha d not been

sold to hel

p-4-

finance the development. But the uncontradicted proof al so shows th at the let ters of c redit did not expire unti l May of 20 00. Th e firs t mort gage given to SouthTrus t was still in effect until that date, as were the gua ranties g iven by the Miller

parties. Mr. Schwab argues that

the Oaktree loan was actually secured by

a second mortgage since the SouthTrust deed of trust had not been fully released. In making

that argum ent, however, he makes the defe

ndant’s p oint that th

e conting encies w ere not s a tisf ied until well after he was the employee of someone else. The trialjudge, howev er, in terpr eted t he term “firs t mort gage fina ncing” to include the Oaktree loan, since it replaced the original construction and development loan. It is undisputed that the Oaktree loan was fore closed, a nd was thu s not paid

while Mr. Schwab was an empl oyee of Miller Develop ment Compa

ny. In e ither ev ent the r

esult is fa tal to Mr . Schwab’ s position.
In addition th

e chanc ellor held that t

he part of the sentence “all guara nties, collateral and o therobli ga tions of owner’s members have been relea sed” refers to the guara nties of the Miller parties even though they

were not “owner’s members.” On this point thechancellor considered parol evidence to clarify wha

t he found to be a latent ambiguity

. See Coble Systems, Inc. v. Gifford Co. , 627 S.W.2d 359 ( Tenn. Ct. A pp. 1981) . Mr. Schw ab objec ts to th e parol evidence because he consider s the ambig

uity , if any , to be pat

ent and not latent.
We think that t

he chancellor w as corr

ect i n considering the parol evidence whe ther the ambiguity is patent o

r latent. The goa

l of the c ourt is to a scerta

in the intention of

the parties. In that pursuit, even in

the absence of an ambiguity , it is permissible to consider the situation of the parties and the accompany

ing circumstances at the time the contract was entered into. Hamblen County v. Cit y of Morristown , 656 S.W.2d 331 (Tenn. 1983). It helps to know that at the time Mr. Schwa b signed his employmen

t agreement none of the “owner’s members” were g uarantors of the obligations covered by the first mortg age. The principal guarantors were Mr. Miller and his family trust. They were the ones to be

nefit fr om the pro vision in the

contract. Therefore a

permissible interpretation is one tha t covers“all gu arantie s” reg ardlessof whether they were given by

the owne rs member s. The judgment below is affirmed and the cause is re mande d t o the Chancery Court of Williamson County for

any furthe

r proceedings necessar

y. Tax the

costs on a

ppeal to t he appellant, David L. Schwab.

_________________________________________ BEN H. CA

NTREL L, PRESI DIN G JUDGE, M. S.