1 Ready previously filed a complaint on July 26, 1995, which was ultimately

dismissed without prejudice for failure to prosecute on July 29, 1999.

IN THE SUPREME COURT OF MISSISSIPPI

NO. 2004-CA-00361-SCT

PETER A. KOURY

v.

JON D. READY

DATE OF JUDGMENT: 02/09/2004

TRIAL JUDGE: HON. DENISE OWENS

COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT

ATTORNEYS FOR APPELLANT: ALAN W. PERRY

PHILLIP SAMUEL SYKES

JOSHUA JAMES METCALF

ATTORNEYS FOR APPELLEE: PAUL ANDERSON KOERBER

NATURE OF THE CASE: CIVIL - CONTRACT

DISPOSITION: REVERSED AND RENDERED - 07/21/2005

MOTION FOR REHEARING FILED:

MANDATE ISSUED:

EN BANC.

RANDOLPH, JUSTICE, FOR THE COURT:

¶1. On May 30, 2001, Jon D. Ready filed a complaint in the Chancery Court of the First

Judicial District of Hinds County, Mississippi, against his former business partner, Peter A.

Koury. 1 The complaint asserted numerous causes of action against Koury including allegations

of fraud, duress, b reach of contract, and a workers’ compensation claim. The trial court

granted summary judgment in favor of Koury on Ready’s workers’ compen sation claim, as it2

was barr ed by the applicable statute of limitations. After a three-day trial, the trial court found

that Ready was not under duress at the time of the signing of th e dissolution agreement, but

found that the dissolution agreement was procured by fraud. Therefore, the trial court looked

only to the Partnership Agreement in determining the parties’ rights and liabilities. The trial

court awarded Ready $7,798.45 in damages and partial attorney’s fees in the form of punitive

damages in the amount of $23,106.27. From that judgment, Koury appeals and Ready crossappeals.

FACTS

¶2. Koury and Ready’s business relations hip began in 1974 when Ready went to work with

Koury at his accounting firm. Ready worked as an independent contractor at Koury’s

accounting firm for

about a year, and in September of 1975, Koury and Ready formed a

partnership. On January 1, 1988, a partnership agreement was executed. The name and the

members of the partnership changed over time, but b y 1990, the only remaining partners were

Koury and Ready with the ownersh ip interest divided between Koury and Ready as follows:

Ready possessed forty-two percent of the equity in the firm, with Koury owning fifty-eight

percent of the equity in the firm. Tommy Butler was also designated as a partner in the firm,

but had no actual ownership i nterest. The Firm was named Koury, Ready, and Butler (“KRB”).

¶3. On March 30, 1990, Ready suffered a de bilitating stroke which resulted in the loss of

much of his eyesight. Ready never recovered enough in order to continue his practice as a

certified public accountant.3

¶4. The partnership agreement, executed Januar y 1, 1988, set forth the requirements and

provisions concerning the method the partnership would operate in the event of such a

disability. Section 7-3 of the partnership agreement concerning disability read as follows:

Disability. If a partner becomes disabled, physically or mentally, his distributive

s hare of partnership profits and losses shall continue during the period of his

disability in accordance with the following schedule:

a. First six (6) months of disability - full draw and share of profits;

b. Next twelve (12) months of disability - 100% of his monthly profits share

less disability insura

nce benefits including workmen’s compensation distributed

monthly. For purposes of this Article, the annual calendar year income of the

partnership shall be prorated on a monthly basis.

The return to practice in the partnership at any time during the 18 month period

after the disability o ccurs will restore the disabled partner to his full draw and

share of the profits, commencing with the first month following his re s umption

of a ctive partnership responsibilities. A partner who has been disabled for 18

months shall be deemed to have retired a t that time and retirement procedures

as provided for in Paragraph 7-4 of this partnership agreement shall thereupon

take effect.

¶5. Therefore, according to the partnership agreement, Ready was entitled to his full draw

and share of profits of the partnership until September 30, 1990, (six months following his

stroke) and for twelve months thereafter (until Septembe r 30, 1991) he was to receive one

hundred percent of his monthly profit share, less any di sability insurance benefits received.

However, Ready’s last draw check was received on July 13, 1990.

¶6. On June 10, 1992, Ready assigned his partnership interest to Koury i n an Agreement

for Dissolution of Partnership and Liquidation of Partnership Interest (“Dissolution

Agreement”) which was made effective as of September 30, 1991. In the Dissolution

Agreement, the parties acknowledged that the total due to Ready as a result of his retirement2 The accounting was to be made at the end of the month in which his retirement was

to take place, which was September 30, 1991.

4 from the firm was $166,071.69, of which $8 0,160.86 was repayment of Ready’s capital

account and $85,910.83 was compensation for past services.

¶7. In the summer of 1990, after Ready’s stroke, Koury became involved in discussions

with May and Co., another accounting firm, about a poss ible merger of the two firms. Ready

was aware of the merger discussions, as Koury gave Ready a copy of the agreement of an intent

to combine the two firms in early 1991. The merger proceeded on September 30, 1991

(Re ady’s effective date of retirement), and the two firms made arrangements that if Ready

recovered, he would be a member of the merged firm.

¶8. After signing the dissolution agreement, Ready claimed he became aware of facts which

led him to belie ve that he was defrauded into signing the dissolution agreement. In October

of 1994, Ready learned that certain accounts that had be en written off as uncollectible, had

been collected in October of 1991.

¶9. Section 7-4 of the partnership agreement concerning “bad debts” read as follows:

For a pe riod of one year following the final accounting date 2

, any collection of

bad debts previously charged off shall be shared with the retiring partner . . . in

the same proport ion as was applicable to the partner’s percentage of the profits

for the fiscal period during which the bad debts were ch a rged off on the books

of the partnership as being uncollectible.

The dissolution agreement con tained a similar provision in Section 7 which read as follows:

in accordance with Section 7-4 of the Partnership Ag reement, the Firm and/or

Remaining Partners shall pay Ready forty-two percent (42%) of any “net bad

debts” collected prior to Se ptember 30, 1992. “Net bad debts” shall be defined

as any collections of accounts rec e ivable of the Firm written off as being

uncollectible prior to September 30, 1991, net of any related expenses of

collectio n. Also, should any account receivable or work in process of the Firm5

for which Ready and JDRL wer e given credit in computing the amount set forth

in paragraph 3 be written off, or down, or ot herwise be deemed uncollectible,

Ready and/or JDRL shall bear a forty-two percent (42%) share of such am ount

written off, or down, or deemed uncollectible.

Koury agreed that, if Ready is owed a sha re of collections after September 30, 1992, then

Koury would owe Ready the additional amount of $7,798.45. However, if the cut off date for

credit received for bad debts was held to be September 30, 1992, then Ready would owe Koury

$3,871.96

¶10. As part of the partners hip dissolution, the furniture, fixtures, and equipment was valued

at $23,873. However, Ready learned that in the May and Co. merger, the furniture and fixtures

were valued at $97,429.

¶11. At trial, Ready sought his interest of the value of the acco unts receivables, furniture,

fixtures and equipment, and the revenue of KRB, that he alleged he had not received upon

dissolution. The trial court found that Ready was entitled to recover $7,798.45 as additional

compensation for his share of the accounts receivable, and also awarded attorn ey’s fees to

Ready. The trial court also found that Ready had been defrauded in the procurement of the

dissolution agreement.

ANALYSIS

¶12. The prop er standard of review for this Court to apply to the chancery court’s decision

is abuse of discretion. M cNeil v. Hester

, 753 So. 2d 1057, 1063 (Miss. 2000). “We will not

interfere with or disturb a chancellor's findings of fact unless those findings are manifestly

wrong, clearly erroneous, or an erroneous legal standard was applied.” G .B. "Bo ots'' Smith

Corp. v. Cobb

, 860 So. 2d 774, 776-77 (Miss. 2003). “Questions concerning the construction6

of contracts are q uestions of law that are committed to the court rather than questions of fact

committed to the fact finder.” M iss. State Highway Comm'n v. Patterso n Enters. Ltd. 627

So. 2d 261, 263 (Miss. 1993).

I. Accounts receivable

¶13. The opinion and order of the trial court stated the following:

The C ourt finds that Defendant failed to disclose certain accounts receivable and

work-in pr ocess but that Defendant did not misrepresent the value of furniture

or fixtures. An agreement procured by fraud or misrepresentation is voidable.

Turner v. Wakefield, 481 So. 2d 846, 848-849 (Miss. 1985). Th erefore, it is

necessary to look only to the Partnership Agreement to determine the parties’

rights and liabilities.

Because the trial court determined that the agreement was procured by fraud, this Court must

exa mine the elements of fraud which are as follows: (1) a representation, (2) its falsity, (3) its

materiality, (4) the speaker's knowledge of its f alsity or ignorance of its truth, (5) his intent

that it should be acted on by the hearer and in the manner reasonably contemplated, (6) the

hearer's ig

norance of its falsity, (7) his reliance on its truth, (8) his right to rely thereon, and

(9) his consequent and proximate injury

. M abus v. St. James Episcopal Church

, 884 So. 2d

747, 762 (Miss. 2004).

¶14. The trial court’s findi ng of fraud was predicated upon Koury’s alleged failure to

disclose certain accounts receivable and work in progr ess. However Koury’s alleged failure

to disclose does not automatically result in a finding of fraud, as all other elements of fraud

must be satisfied in order to support a fin d ing of fraud. Assuming arguendo that Koury did

misrepresent certain

accounts receivable, Ready must have suffered damages as the

consequences thereof. Also, “proving fraud is difficult, as it ought to be. Clear and convincing7

evidence is required.” M

artin v. Winfield 4 55 So. 2d 762, 764 (Miss. 1984), citing Cotton v.

McConnell

, 435 So.2d 683, 685-89 (Miss. 1983); Franklin v. Lovitt Equip. C o., 420 So. 2d

1370, 1373 (Miss. 1982).

¶15. The partnership agreement stated that for a period of one year following the final

acco unting date, any collection of bad debts previously charged off would be shared with the

retiring partner. Furthermore the dissolution agreement provided that, “the Firm and/or

Remaining Partners shall pay Ready forty-two percent (42%) of any “net bad debts” collected

prior to September 30, 1992.” Our law requires this Court to accept the plain meaning of a

contract as the intent of the parties if no ambiguity exists. IP Ti mberlands Operating Co. v.

Denmiss Corp.

, 726 So. 2d 96, 108 (Miss. 1998). “Only if the contract is unclear or

ambiguous can a court go beyond the text to de t ermine the parties' true intent.” Cobb

, 860 So.

2d at 777. This Court finds no ambiguity in either contract, as each state that any collections

on bad debts will be paid to the retiring partner until a year after the retirement date, which in

Ready’s case would have been September 30, 1992.

¶16. The trial court was aware of this one-year collection period, as i t stated in its opinion

and order that, “for one year following the accounting, any collec tion of bad debts previously

charged off are to be shared with the retiring partner.” However, in awarding damages to the

plaintiff, the trial court relied on Guy Story’s report, which include d accounts receivables

through the year 1996. This was contrary to the plain language of the partnership and

dissolution agreements, as both agreements provided that Ready was entitled to credit from

these accounts only up until September 30, 1992; a year after his retirement d ate. “Contracts

are solemn obligations and the Court must give them effec t as written.” I d. B ecause Ready3 Koury has waived recovery of this amount.

4 Koury did not attempt to collect this amount.

8 was only entitled to credit for these accounts until Sept. 30, 1992, Ready actually owed Koury

$3,871.96, 3 based on the clear unambiguous words of both agreements.

¶17. Notwithstanding this, the chancellor found in favor of Re ady in the amount of

$7,798.45, based on the report of Guy Story, a certified public accountant, which was verified

by t he plaintiff’s expert Mark Bullock, also a CPA, as the amount that Koury owed Ready for

accounts receivables not disclosed to Re ady. In calculating this amount of $7,798.45, Story

and Bullock calculated accou nt receivables until the year 1996. However, if account

receivables and “net bad debts” were o nly calculated until September 30, 1992, Ready would

have actually owed Koury $3,871.96. 4

¶18. The alleged failure of Koury to disclose accounts re ceivable to Ready caused no injury

as Ready actually owed $3,8 71.96 to Koury. Because Ready owed Koury, Ready was not

injured from this nondisclosure. Absent injury there can be no fraud. G eneral Motors

Acceptance Corp. v. Baymon

, 732 So. 2d 262, 270 (Miss. 1999) . “It is clearly the law that

a misrepresentation which neither does a plaintiff any harm nor causes a loss is not

actionable.” M

cMullan v. Geosouthern Energy Corp.

, 556 So. 2d 1033 , 1037 (Miss. 1990),

citing Monsanto Co. v. Cochran , 254 Miss. 399, 180 So. 2d 624 (1965). Accordingly, this

Court finds an esse ntial element of fraud absent, with respect to Koury’s failure to disclose

accounts receivables. Finding no injury, this Court does not analyze whether the other9

elements of fraud were prese nt. Clear and convincing evidence does not exist to support a

finding of fraud.

II. Was Ready entitled t o additional money for furniture, fixtures, and

equipment and for the May and Company merger?

¶19. The trial court found that Koury did not misrepresent the value of furniture a nd fixtures.

Furthermore, the trial court did not award Ready any mon ey from the May and Company

merger. “Whenever there is substantial evidence in the record to support the chancellor's

findings of fact, those findings must be affirmed.” I n re Conservatorship of Bardwell

, 849

So. 2d 1240, 1245 (Miss. 2003). This Court finds substantial evidence to support the

chancellor’s finding that Koury did not misrepresent the value of the furniture and fixtures.

This Cou rt finds substantial evidence in support of the trial court’s decision not to award Ready

any damages for the May and Company merger.

¶20. Ready

was paid $23,873 for the furniture, fixtures, and equipment which was derived

from appraisals that were used in an earlier dispute between forme r partners of KRB. In the

merger with May and Company, the furni ture, fixtures, and equipment were valued using the

tax assessors’ value w hich was $97,429. This Court finds no fraud with respect to the appraisal

method and value used to determine how much Ready would be paid f or the furniture and

fixtures.

¶21. Both Ready and his counsel kne w that May & Company was paying Koury the assessed

value for the furnit ure and fixtures before Ready signed the dissolution agreement. It was a

subject of negotiations between the part ies. Ready’s attorney testified that he knew that what

Koury had agreed to pay Ready was not th e assessed value. Ready also knew of the plans to10

merge with May and Company, as he was presented with an agreement of intent for the merger

on January 18, 1991. As stated earlier, without damages or injury, there can be no fraud.

Mabus

, 884 So. 2d at

762. Furthermore, the merger did not take place until one day after

Ready retired, and per the partnership agreement, Read y was only entitled to his interest in

KRB until the day he retired. This Court can not find evidence to support a finding of fraud

concerning the valuation of furniture, fixtures, and e q uipment or the merger with May and

Company.

CONCLUSION

¶22. Finding that all elements of fraud were not proven, we reverse the trial court’s judgment

awarding damages and render judgment for K o ury that Ready take nothing and his complaint

and this action are finally dismissed with prejudice.

¶23. REVERSED AND RENDERED.

SMITH, C.J., COBB, P.J., EASLEY, CARLSON AND DICKINSON, JJ., CONCUR.

GRAVES, J., DISSENTS WITHOUT S EPARATE WRITTEN OPINION. WALLER, P.J.

AND DIAZ, J., NOT PARTICIPATING.